Trump Tariffs: Goldman Sachs forecasts 0.1-0.6% impact on India's GDP

Trump has threatened to impose at least 25% reciprocal tariffs.

US President Donald Trump has hard plans to impose reciprocal tariffs on trade partners, including India, that have higher taxes on US goods. If imposed, these tariffs could have a 0.1-0.6 percent impact on India's GDP, global investment firm Goldman Sachs forecasted.

Goldman Sachs outlined three potential ways Trump's reciprocal tariffs on India could be implemented. The first is country-level reciprocity, where the US raises tariffs on all Indian imports by the weighted average tariff differential, estimated at around 6.5 percent, making it the simplest to execute.

The second route pointed by Goldman Sach is that of product-level reciprocity, where the US matches India’s tariffs on each imported product, potentially increasing the tariff differential by ~11.5 percent, though it would be more complex and take longer to implement.

The third and most complicated approach involves reciprocity including non-tariff barriers such as administrative hurdles, import licenses, and export subsidies, which could result in even higher tariffs but would be difficult to quantify and enforce.

Also Read | A Bilateral Trade Agreement will insulate India from Trump’s tariff squeeze

Thus far, India’s exports to the US are among the lowest among emerging markets, making up just about 2 percent of its GDP. India's tariffs are also generally higher than those of the US, with the starkest contrasts seen across agriculture, textiles, and pharmaceuticals.

To that effect, Goldman Sachs predicts that if the US raises tariffs on Indian exports under country-level or product-level reciprocity, India's GDP growth could be impacted by 0.1-0.3 percentage points, depending on how US demand responds to higher prices.

However, if the US imposes global tariffs on all countries, India's indirect exposure to US demand could double to around 4 percent of GDP, placing it mid-range among its Asian peers and potentially impacting domestic GDP growth by 0.1-0.6 percentage points, according to the investment firm.

Also Read | Trump’s tariffs on pharma will hurt both India, US

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