iNDICA NEWS BUREAU-
Trump’s tariff may impact India’s Gross Domestic Product (GDP) between 0.1 to 0.6, according to a report by Goldman Sachs. The report which analyses the impact of U.S. tariffs on India’s GDP under country-level reciprocity, and product-level reciprocity says, “India’s domestic activity exposure to U.S. final demand would be roughly twice as high (4.0 percent of GDP) given exposure to the US via exports to other countries, and would likely result in a potential domestic GDP growth impact of 0.1-0.6pp.”
If the Trump administration chooses to increase the tariff on all U.S. imports by the average tariff differential between a particular country and the U.S. Under this scenario, the average U.S. effective tariff rates on Indian imports would increase by 6.5 percentage points.
Under product-level reciprocity if the Trump administration matches the tariff rates on each product levied by its trading partner. The report estimates the weighted average effective U.S. tariff rate on Indian imports could increase by 6.5-11.5 percentage points depending on the kind of reciprocal tariff plan adopted. The report says it will be the most complicated version of reciprocal tariffs to administer.
India’s exports to the U.S. currently account for around 2 percent of GDP and are among the lowest in comparison to other emerging markets. However, the introduction of higher U.S. tariffs could still have a significant impact on India’s domestic economy, the report added.
Although India’s direct exposure to U.S. tariffs is limited, the report adds that if the U.S. applies global tariffs on all countries, the impact on India would be more pronounced. This scenario would likely increase India’s exposure to U.S. final demand to roughly 4 percent of GDP, due to India’s exports to other countries that, in turn, export to the U.S.
India’s bilateral goods trade surplus with the U.S. has doubled in level terms over the last 10 years to $35 billion (1.0% of India’s GDP) in FY24, largely driven by electronics, pharmaceutical products, and textiles.
India’s tariff rates are higher than the U.S. on most products (6.5pp on a trade-weighted average basis), with the differential being the highest in agricultural products, textiles, and pharmaceutical products. President Donald Trump has outlined a new trade policy focused on fairness and reciprocity and said that the U.S. would implement reciprocal tariffs, charging other countries the same tariffs they impose on American goods.
