Trump's 50% tariffs could reduce India's GDP growth by 1%
What's the story
US President Donald Trump's recently imposed 50% tariffs on India could have a devastating impact on the country's economy. According to Bloomberg Economics, the tariffs could also have a significant impact on India's GDP growth for the fiscal year 2025-26, potentially lowering it by as much as 1%. Analysts also warn that the overall impact on GDP could be even greater at 1.1% over the medium term, especially if tariffs are imposed on pharmaceuticals and electronics sectors.
Impact on exports
Tariffs may reduce India's exports to US
Trump's move is part of a wider strategy targeting over 60 countries and follows his imposition of a 25% tariff on July 31, with an additional 25% added on Wednesday. According to the analysts, these tariffs could reduce India's exports to the US by as much as 60% This is based on projections by Chetna Kumar and Adam Farrar at Bloomberg Economics.
Long-term projections
Morgan Stanley report warns of prolonged tariff effects
A report by Morgan Stanley also predicts that if the 50% tariffs remain in place for a longer period, like 12 months, they could reduce India's GDP growth by 0.4-0.8%. However, it also notes that India is unlikely to face this worst-case scenario as policy support is expected if these tariffs continue for an extended period.
Varied predictions
Other financial institutions weigh in on tariff impact
Other financial institutions have also weighed in on the potential impact of Trump's tariffs. Goldman Sachs predicts a 0.6% hit to India's GDP growth, while Citigroup estimates a reduction between 0.6-0.8%. These varied predictions highlight the uncertainty surrounding the long-term effects of these tariffs on India's economy and its trade relations with the US.