Reciprocal tariffs may not impact India much: SBI Research

Researchers noted that there could also be a downturn in the US economy.

US President Donald Trump’s plan to impose reciprocal tariffs may only lead to a 3-3.5 percent decline in exports, with the effect being negated by higher exports, SBI Research said Monday.

“Higher export goals across both manufacturing and services fronts, as India has diversified its exports kitty, pitched value addition, exploring alternate areas and works on new routes that transcend from Europe to USA via the MiddleEast, redrawing new supply chain algorithms,” SBI said will help negate the impact of tariffs.

India will also be able to take advantage of aluminium and steel tariffs imposed by the US last week.

India runs a slight trade deficit with the US at $13 million in aluminium products, and $406 million in steel products. While India doesn't figure among top 10 importer or steel products, accounting for just 1 percent of imports headed to the US, it is among top 10 in aluminium imports. However, its share has dipped from 3 to 2.8 percent between 2018 and 2024.

The SBI research also noted that the shift towards regional supply chains and US tariffs will influence India’s FTA strategy. “India is negotiating FTAs with the UK, Canada, and the EU, targeting sectors like services, digital trade, and sustainable development. The FTA with the UK alone is expected to increase bilateral trade by $15 billion by 2030. Future FTAs will likely focus on enhancing digital trade, with projections indicating that the digital economy could add $1 trillion to India's GDP by 2025,” said SBI researchers.

Researchers noted that there could also be a downturn in the US economy. “Long trends indicate possible downturn in US economy GDP growth along with slowdown in US exports and consumption…The overall value add is showing declining trend with shrinking TFP growth…. High US wages could hold back new investment….Net savings to GDP is also at the lowest level since 2011… second lowest since 1951,” SBI Researchers said.