US President Donald Trump’s rollout of reciprocal tariffs could cost India $3.1 billion or 0.1 per cent of the GDP, according to a report
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US President Donald Trump’s rollout of reciprocal tariffs could cost India $3.1 billion, according to a report from CareEdge Ratings.
This would mean that Trump’s tariff could cut India’s GDP by 0.1 per cent.
Trump is set to start the rollout of his reciprocal tariffs on Wednesday. Even though he has repeatedly flagged India as an abuser of trade owing to higher tariffs that India has historically imposed on US goods, the impact of his tariffs on India is expected to be rather limited. The two countries are also engaged in talks for a bilateral trade agreement and India has offered a host of concessions to Trump so as to not be hit with maximalist tariffs.
If Trump imposes 8 per cent differential tariffs on Indian exports, then combined with an assumed 4 per cent exchange rate depreciation of the Indian Rupee, it would result in net export impact of $4 billion after currency fluctuation adjustment, according to Moneycontrol that cited the report from CareEdge.
Howeever, after accounting for price elasticity and uniform additional tariffs across all export categories, the direct loss is estimated at $3.1 billion.
“We have thus made a simplistic assumption that the US will impose an additional 8 per cent tariff on all imports from India. We have also made an assumption of some rupee depreciation at 4 percent based on last year’s actuals, which would offset part of the impact of the higher tariffs, and have further assumed that the price elasticity of demand for India’s exports to the US is 1,” said CareEdge Director Smita Rajpurkar.
It is not yet clear how Trump would impose tariffs. The idea behind reciprocal tariffs was that the United States would impose as much tariffs on a country that the country imposes on US goods. This would have meant a country-by-country, product-by-product rollout of tariffs. However, reports have said this week that Trump is considering a blanket tariff rollout instead of targeted measures.
Trump has already announced 25 per cent tariffs of automobiles, steel, and aluminium. He has also imposed 20 per cent tariffs on China in two tranches. He has also imposed 25 per cent tariffs on Canada and Mexico. From all of these tariffs, he expects to raise up to $6 trillion in annual revenue.
