The Trump Administration’s proposed ‘reciprocal tariffs’ on Indian imports may reduce India’s GDP growth by 0.1 per cent to 0.6 per cent, according to a recent Goldman Sachs analysis. 

The research report, authored by Chief India Economist Santanu Sengupta, outlines three potential implementation strategies for these tariffs:

Country-Level Reciprocity: The US could uniformly increase tariffs on all Indian imports by approximately 6.5 per cent, matching the weighted average tariff differential; 

Product-Level Reciprocity: Tariffs could be adjusted on a per-product basis, potentially raising the differential by about 11.5 per cent; 

Inclusion of Non-Tariff Barriers: This approach would consider factors like administrative hurdles and import licenses, leading to even higher tariffs, though it presents challenges in quantification and enforcement.

India’s exports to the US constitute roughly 2 per cent of its GDP, with higher tariff rates compared to the US, especially in sectors like agriculture, textiles, and pharmaceuticals. Goldman Sachs estimates that country-level or product-level reciprocity could impact India’s GDP growth by 0.1 to 0.3 percentage points, depending on US demand elasticity. A broader application of global tariffs could double India’s exposure to US demand, potentially affecting GDP growth by up to 0.6 percentage points.

This analysis underscores the significant economic implications of potential US tariff adjustments on India’s economy, say economy watchers.

Published on February 20, 2025