Trump's tariff, if imposed after the 90-day pause, could lower India’s FY26 GDP to 6.1%: Moody’s

US tariffs will hurt APAC

The Indian economy could be staring at a slower pace of growth this year, at 6.1 percent compared with 6.4 percent as projected earlier, if the US’ plan for trade tariffs come into effect after three months, Moody’s Analytics said on April 9.

“The US is one of India's largest trading partners, so a 26% tariff hovering over imports of Indian goods will heavily impede the trade balance. Gems and jewellery, medical devices, and textile industries will be among the worst hit, Moody’s Analytics said in a report released on Thursday.

The US President had imposed a 26 percent duty on Indian imports on April 2, as part of his reciprocal tariff plan, but ordered a 90-day pause on April 9, with a lower 10 percent rate fixed for all nations except China.

While the US action is expected to hurt India, Moody’s highlighted that Indian economy could be relatively less impacted as external demand contributes a smaller proportion to growth.

It further said that the rate cuts by RBI, coupled with the tax exemption announced by the Centre during the Union Budget may give a further boost to consumption.

“Given headline inflation has been easing at a healthy pace, we expect the Reserve Bank of India to lower interest rates, most likely in the form of 25-basis point cuts that take the policy rate to 5.75% by the end of the year. This, paired with tax incentives announced earlier this year, should help boost the domestic economy and dampen the shock of the tariffs on overall growth relative to other vulnerable economies,” it said.

Reserve Bank of India on April 9, delivered its second consecutive rate cut, bringing the policy rate down to 6 percent.

Other Asian nations with larger share of export contribution to the economy are expected to face a more significant rout. “Cambodia, Vietnam, Thailand and Taiwan are the most exposed because exports are the backbone of their economies and the U.S. has become an increasingly important export destination,” Moody’s Analytics said.

“The ‘Liberation Day’ tariffs declared last week increased the odds of a global recession. Under those tariffs, inflation across Asia would stay subdued amid weaker trade and growth dynamics. Inflation in the U.S., however, would rise as tariffs increased prices of producer and consumer goods,” it further added.