What Impact Will 50% US Tariff Have On India's GDP Growth?

Trump Tariffs: The new Trump tariffs, an additional 25 percent, came into effect on Wednesday. Most Indian exports, including products like clothes, jewelry, and carpets, which are exported to US markets, became much more expensive compared to their prices before the tariffs were imposed. However, S&P Global Ratings agency put India's growth on positive trend.

Trump's 50 per cent tariff comes into effect today
The US had already imposed a 25 percent tax on all merchandise exports from India last month, making low margin and low labor cost goods such as apparel, textiles, and jewelry a lot more expensive in the US. With the latest imposition of 25 per cent, this jeopardizes the jobs of low skilled workers in India.

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India is one of the few countries on the global map to export more goods than it buys from the US. The skyrocketing tariffs will make it nearly impossible for Indian traders to survive in the US market as the latest Trump’s tariff put New Delhi on the list of the highest tariff table in the world. The total export to the US makes up about 2 percent of India's GDP but 18 percent of merchandise exports to the US. This means that out of every 100 products being sold in the US, 20 products are manufactured in India.

India-US trade in numbers
In 2021-25, the US was India's largest trading partner. The US accounts for about 18 per cent of India's total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade. With America, India had a trade surplus (the difference between imports and exports) of USD 35.32 billion in goods in 2023-24. It was USD 41 billion in 2024-25. In 2024-25, bilateral trade between India and the US reached USD 186 billion. India exported goods worth USD 86.5 billion while imports stood at USD 45.3 billion.

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How the US Tariff Will Impact Indian GDP
Replying to a query on whether the tariff imposition poses downside risks to the positive outlook on India, S&P Global Ratings Director YeeFarn Phua said, "I don't think the tariffs imposed on India will have an impact in terms of economic growth, largely because India is not a very trade-oriented economy. And if you look at India's exposure to the US in terms of exports to GDP, it is just about 2 per cent".

Despite Trump announcing a 50 per cent tariff on India on August 6, S&P estimates India's GDP growth in the current fiscal year at 6.5 per cent, the same as it was in the previous financial year.

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How traders’ bodies react to Trump’s tariff bombshell
Trade experts predict that the revenue earned by Indian exporters could be cut in half next year due to the imposition of the Trump tariffs. A resulting 40 to 45 percent drop in merchandise exports could be very visible in export numbers next year. The Global Trade Research Initiative GTRI, a global think tank, estimates that the value of Indian exports will drop from 87 billion dollars to 49.6 billion dollars this year.