Donald Trump US reciprocal tariffs – Donald Trump’s US tariffs might influence India’s GDP by 0.1-0.6%: Goldman Sachs

A report by Goldman Sachs has highlighted the potential influence of US tariffs on India’s gross home product (GDP). The report means that India’s GDP could possibly be affected by 0.1 to 0.6 share factors if the US administration, beneath President Donald Trump, decides to extend tariffs on all US imports to match the common tariff differential between India and the US. 

“India’s home exercise publicity to US remaining demand can be roughly twice as excessive (4.0 per cent of GDP) given publicity to the US through exports to different nations, and would possible end in a possible home GDP development influence of 0.1-0.6pp,” the report acknowledged.

The report additional explains that beneath product-level reciprocity, the place tariff charges on every product are matched with these levied by buying and selling companions, the weighted common efficient US tariff price on Indian imports may rise by 6.5 to 11.5 share factors. This enhance would depend upon the type of reciprocal tariff plan adopted by the US.

“India’s home worth added content material in gross exports at ~4.0 per cent of GDP is roughly within the center amongst its Asian friends. Below this metric the potential home GDP development influence (from a 6.5-11.5pp enhance in US common efficient tariff charges) would possible vary from ~0.1-0.6pp,” acknowledged the report.

Goldman Sachs additionally famous that non-tariff obstacles, corresponding to import licences and export subsidies, current a posh problem. These obstacles are troublesome to estimate for every buying and selling accomplice, main the report back to focus solely on tariff-related obstacles. India’s exports to the US presently symbolize round 2 per cent of its GDP, which is comparatively low in comparison with different rising markets. Regardless of this, increased US tariffs may nonetheless considerably influence India’s home financial system.

The report provides that if the US applies world tariffs on all nations, the influence on India can be extra substantial. This situation would possible enhance India’s publicity to US remaining demand to roughly 4 per cent of GDP, attributable to India’s exports to different nations that, in flip, export to the US.

India’s bilateral items commerce surplus with the US has doubled over the past decade, reaching $35 billion (1 per cent of India’s GDP) in FY24. This development has been primarily pushed by electronics, pharmaceutical merchandise, and textiles. India’s tariff charges are usually increased than these of the US on most merchandise, particularly in agricultural merchandise, textiles, and prescribed drugs.

President Trump has emphasised a brand new commerce coverage targeted on equity and reciprocity, stating that the US would implement reciprocal tariffs to cost different nations the identical tariffs they impose on American items.