Analysts expect 30 points dent on India GDP growth due to Trump’s tariffs

By Anjali Sharma

WASHINGTON – US President Donald Trump on Thursday announced a 25% tariff on Indian goods and penalty on India for Russian imports, Barclays said the move could dent India’s GDP growth by 30 basis points in the current fiscal.

Barclays said the move could dent India’s GDP growth by 30 basis points in the current fiscal.

It added that the higher duty is unlikely to significantly affect India’s domestic demand-driven economy, it added.

As per its estimate, if the 25% tariff is implemented from August 1, the effective average US import tariff on Indian goods will rise to 20.6% in trade-weighted terms.

“We do not see this 25% tariff threat impacting GDP growth meaningfully, pegging the likely impact at 30 bp. We expect final tariffs on India to settle lower than the announced 25%, as India and the US continue with trade deal talks,” it said.

Analysts expect the tariffs alone could result in a 20-50 basis point hit to India’s gross domestic product.

Bloomberg Economics have also projected that a 26% reciprocal levy could cut US-bound shipments by 30%. The overall impact of Trump’s policies could be more severe depending on the Russian “penalty” that is eventually levied on Indian exports.

Nomura said the seafood sector, which is a key supplier of shrimps and prawns to US supermarket chains like Walmart, could lose some of its competitive edge to other suppliers.

The sector, which exported goods worth more than $10 billion last year, has warned of job losses potentially hitting thousands. Kirit Bhansali, chairman of Gem and Jewellery Export Promotion Council, said the tariffs would “inflate costs, delay shipments… and place immense pressure on every part of the value chain”.

Think tank Global Trade Research Initiative said that by refusing to cross its red lines, particularly on agriculture, India has helped avoid “the trap of a one-sided deal”.

“India’s tariffs are WTO-compliant, non-tariff barriers are common globally, and discounted Russian oil has helped India manage inflation during global volatility…India is not alone; over 90 countries face similar US pressure. A deal may still emerge, but only on fair terms. For now, India’s principled stand has avoided the trap of a one-sided deal, and that’s a success,” GTRI said in a statement.

Hemant Jain, President, PHDCCI said while Indian MSMEs are momentarily impacted, this is also an opportunity.

“With global buyers looking to de-risk from overdependence on select geographies, India is emerging as the most credible, democratic, and scalable alternative.”

“Now is the time for Indian industry to step up with quality, compliance, and competitiveness. And with China and Vietnam facing similar tariff headwinds, India stands to gain long-term trust, diversified market share, and stronger positioning as a resilient global partner,” Jain added.

Aditi Nayar, chief economist at ratings agency Icra, said in a statement “The tariff (and penalty) now proposed by the US is higher than what we had anticipated and is therefore likely to pose a headwind to India’s GDP growth. The extent of the downside will depend on the size of the penalties imposed,”.

Icra had previously reduced its gross domestic product (GDP) forecast for India for this financial year from 6.5% to 6.2% due to the adverse impact of the tariff hikes.

The smart phones and pharmaceuticals are currently exempt from Trump’s duties.

The 25% tariff is sharply higher than both the pre liberation day tariff rate of 2.7% announced by Trump, the 90-day pause tariff rate of 11.6%.

In contrast, India’s import tariff on US goods is lower, at 11.6% in trade-weighted terms.

Indian government released a statement stated both the countries have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months.

“We remain committed to that objective. The government attaches utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs. We will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK,” it concluded