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Trump's tariff may impact India's Gross Domestic Product (GDP) in between 0.1 to 0.6 according to a report by Goldman Sachs.
The report which analyses the impact of US tariffs on India's GDP under country-level reciprocity, product-level reciprocity says, "India's domestic activity exposure to US final demand would be roughly twice as high (4.0 per cent 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 Trump administration chooses to increase the tariff on all US imports by the average tariff differential between a particular country and the US. Under this scenario, the average US 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 US tariff rate on Indian imports could increase by 6.5-11.5 percentage points depending on the kind of reciprocal tariff plan adopted. If Non-tariff barriers or administrative barriers are applied for import licenses, export subsidies etc. The report says it will be the most complicated version of reciprocal tariffs to administer and given the complexity of estimating the cost of non-tariff barriers for each trading partner, the report avoided commenting on this and limited its analysis to tariff-related barriers only. India's exports to the US currently account for around 2 per cent of GDP, and are among the lowest in comparison to other emerging markets. However, the introduction of higher US tariffs could still have a significant impact on India's domestic economy, the report added. Although India's direct exposure to US tariffs is limited, the report adds that if the US applies global tariffs on all countries, the impact on India would be more pronounced. This scenario would likely increase India's exposure to US final demand to roughly 4 per cent of GDP, due to India's exports to other countries that, in turn, export to the US. India's bilateral goods trade surplus with the US has doubled in level terms over the last 10 years to USD 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 US on most products (6.5pp on a trade-weighted average basis), with the differential being the highest in agricultural products, textiles, and pharmaceutical products. US President Donald Trump has outlined a new trade policy focused on fairness and reciprocity and said that the US would implement reciprocal tariffs, charging other countries the same tariffs they impose on American goods. (ANI)
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