US President Donald Trump has imposed an additional 25 per cent tariff on imports from India and economist feel the move could dent the India’s GDP growth in FY26 by 0.4 per cent.
Sonal Badhan, Economics Specialist at Bank of Baroda, told ANI, “We had initially priced in approx. 0.2 per cent impact (on GDP growth) of 25-26 per cent tariffs imposed by the US on imports from India. The additional 25 per cent hike will come into effect after 21 days. During this time or in the coming months, there is a likelihood that lower rates may be negotiated.”
She added that depending on the final trade agreement, the total impact of these tariffs on GDP growth may range between 0.2-0.4 per cent. Sectors likely to be affected include garments, precious stones, electronics, pharma, auto parts, and MSMEs.
“There appears to be downside risk to our growth forecast of 6.4-6.6 per cent if lower rates are not negotiated,” she added.
The move has also triggered serious concerns among Indian exporters and trade experts. The fresh tariff has taken the total US import duty on Indian goods to 50 per cent, making Indian exports significantly more expensive in the American market.
The move, announced through an executive order on Wednesday (US time), is in response to India continuing its import of oil from Russia.
The executive order by Trump stated that, “I find that the Government of India is currently directly or indirectly importing Russian Federation oil.
Accordingly, and as consistent with applicable law, articles of India imported into the customs territory of the United States shall be subject to an additional ad valorem rate of duty of 25 percent”.
Ajay Bagga, a Banking and Market Expert, told ANI that the steep tariff is a major blow. “India is now hit with 50 per cent tariffs, but frankly, once it crossed 25 per cent, it didn’t matter. It could be 1,000 per cent or 5,000 per cent, here’s no trade possible anymore,” he said.
Bagga pointed out that with Christmas orders ready and shipments already prepared, the move hits exporters hard. “If USD 1 billion worth of textile exports are halted, it directly impacts around 100,000 workers.”
Agneshwar Sen, Trade Policy Leader at EY India, called the additional tariff unnecessary.
He stated, “Political differences are best resolved through mutual dialogue and established forums, not through such measures. I remain hopeful that the Government of India will continue to engage and seek a balanced resolution with the U.S,” he said.
The Federation of Indian Export Organisations (FIEO) also raised concerns.
FIEO President, S C Ralhan, said, “Nearly 55 per cent of our shipments to the US market are directly affected. The 50 per cent tariff puts Indian exporters at a 30-35 per cent competitive disadvantage.”
He added that many buyers are now putting export orders on hold due to the higher landed costs.
“For MSMEs, absorbing this cost is not viable. This could force many to lose long-standing clients,” he added.
While the executive order imposes tariffs on most Indian imports, some items have been excluded under Annex II of Executive Order 14257. These include certain mineral substances, metallurgical ores, fuels, industrial chemicals, and pharmaceutical precursors.
Meanwhile, India has clarified that it will continue to buy oil based on its own strategic interests.
Trade tensions between the two countries now appear to be escalating, and the coming weeks may be crucial as both sides look to negotiate possible relief. (ANI)
