China Tops India Trade in FY26; Deficit Hits $112B

China retakes the No.1 spot in India’s trade

China has overtaken the United States to become India’s largest trading partner in FY2025-26, according to government data cited in reports. Bilateral trade with China reached $151.1 billion in the fiscal year, while India’s trade deficit with Beijing widened to $112.16 billion during the period. The shift matters because it comes after the US held the top position for four consecutive years up to FY2024-25.

The latest figures also underline a familiar pattern in India-China commerce: even when exports rise, imports tend to remain significantly higher. The result is a widening trade gap that remains a recurring policy and industry concern.

FY2025-26: exports up, imports higher

Government data showed India’s exports to China rose 36.66% to $19.47 billion in FY2025-26. Imports from China increased 16% to $131.63 billion. With imports far outpacing exports in absolute terms, the deficit expanded sharply.

Reports also cited the deficit at $112.6 billion in FY2025-26, compared with $19.2 billion in FY2024-25, calling it an all-time high. The FY2024-25 deficit figure of $19.2 billion was repeated across multiple excerpts in the provided material.

US trade: surplus narrows as imports rise faster

India’s trade with the US moved differently. For FY2025-26, India’s outbound shipments to the US grew 0.92% to $17.3 billion, while imports increased 15.95% to $12.9 billion. That pushed India’s trade surplus with the US down to $14.4 billion in FY2025-26 from $10.89 billion in FY2024-25.

The US was India’s largest trading partner for four straight years till FY2024-25. The FY2025-26 reversal therefore reflects both the strength of India-China goods flows and a moderation in India-US trade momentum.

Two sets of headline totals: government data vs embassy post

Alongside the government data, Beijing’s embassy in New Delhi also discussed the shift. China’s ambassador to India, Xu Feihong, said in a post that bilateral trade between India and China reached $137 billion in the period April 2025 to February 2026. He also stated that China became India’s largest trading partner in FY2026 “for the 11th straight month”.

In the same April-to-February window, India’s bilateral trade with the US stood at $127.8 billion, according to the ambassador’s post. The difference in the China trade totals across sources reflects the time window being compared: a full fiscal year figure cited from government data versus an April-to-February snapshot mentioned by the embassy.

What the widening China deficit signals

The FY2025-26 deficit with China, cited at $112.16 billion (and separately at $112.6 billion), highlights how import dependence remains a key feature of the relationship. The deficit grew from $19.2 billion in FY2024-25, reinforcing that higher exports alone have not been enough to materially narrow the gap.

The provided material also noted that China was India’s top trading partner from 2013-14 to 2017-18, and again in 2020-21, before the US led for four years up to FY2024-25. That history shows the leadership position has shifted over time, but the structural nature of the deficit has persisted.

Monthly trade data adds pressure points

Recent monthly trade numbers included in the material point to broader import-export volatility. India’s merchandise trade deficit widened to $17.10 billion in February 2026, nearly doubling from $14.42 billion a year earlier, though slightly below market expectations of $18.0 billion. In February, imports jumped 24% year-on-year to $13.71 billion, while exports fell 0.8% to $16.61 billion. The increase in imports was linked in the text to purchases of gold and silver.

The same compilation also cited January 2026 data, stating the merchandise trade deficit surged to $14.68 billion, compared with $13.43 billion a year earlier, and referenced October’s record deficit of $11.68 billion.

Tariffs and logistics disruptions in the background

The material connected the widening deficit environment to policy and supply-chain factors. It stated that in late February, the US imposed a temporary 10% tariff on Indian goods alongside standard MFN rates, following a Supreme Court ruling that struck down earlier higher tariffs.

It also said the widening deficit reflected rising freight costs and supply disruptions in West Asia, with exporters in sectors such as apparel and manufacturing adjusting shipment schedules and exploring alternative routes to manage higher logistics costs and longer shipping times.

Summary table: key trade numbers cited

Market impact: what investors usually track

For markets, the immediate read-through is typically on the import bill, currency sensitivity, and sector-level exposure to global supply chains. The February 2026 data in the material showed a sharp year-on-year jump in imports, led by precious metals purchases, alongside a modest dip in exports. Separately, the FY2025-26 China deficit figures highlight continued dependence on imported inputs and finished goods, even as exports to China grew strongly.

Investors also watch policy responses, including trade remedial actions and tariff changes by major partners, because these can affect export competitiveness and margin assumptions for companies with cross-border exposure.

Why the FY2025-26 shift matters

China regaining the top trading-partner position signals that India’s import demand from China remains large and resilient. At the same time, India’s trade surplus with the US narrowed in FY2025-26 because imports rose faster than exports, even as exports remained high in absolute terms.

The data points in the provided material, taken together, show that India’s trade picture is being shaped by multiple moving parts: partner-specific balances (surplus with the US versus deficit with China), month-to-month swings in the overall deficit, and changes in tariffs and logistics conditions.

Conclusion

FY2025-26 government data shows China overtaking the US as India’s largest trading partner, with bilateral trade at $151.1 billion and the China trade deficit widening to over $112 billion. The US remains a major export market for India, but the surplus narrowed as imports rose. Future data releases from the commerce ministry, along with any further tariff updates and shipping disruptions, will be key to tracking how these trends evolve.