MUMBAI: US President Donald Trump’s decision to impose steep tariffs on Indian goods could endanger $30–35 billion worth of India’s merchandise exports to its largest market, UBS Chief India Economist Tanvee Gupta Jain has warned.
The tariffs – a 25 per cent levy already in effect and an additional 25 per cent from August 27 – effectively double duties on most Indian exports entering the US, barring a few sectors like pharmaceuticals and smartphones, which are under Section 232 investigation and currently exempt.
These exempt categories account for around $24 billion, or 30 per cent of India’s $87.3 billion in goods exports to the US in 2024.
With the US taking nearly 20 per cent of India’s merchandise exports, Jain estimates the GDP drag from the tariffs at 35 basis points in FY26 and 60 bps in FY27 – almost a full percentage point over two years – assuming trade flows shrink in line with price elasticity of -1. “Our estimates are subject to uncertainty as negotiations with Washington are ongoing,” she said, adding that the final impact will also depend on global growth trends and whether India deploys countre-cyclical measures to shore up demand.
India enjoyed a $45.8 billion goods trade surplus with the US last year, but that advantage could erode sharply if tariff-induced costs push American buyers to shift sourcing.
Jain also noted that India’s savings from discounted Russian oil – at about $2 billion annually – are relatively small, implying a shift away from such purchases would not be a major macroeconomic hit.
