The United States’ decision to impose steep tariffs on Indian goods is set to weigh on the American economy by stoking inflationary pressures and slowing growth, the State Bank of India (SBI) said in a report.
According to the report, US GDP could take a 40-50 basis point hit from the new tariffs, alongside higher input cost inflation. “We believe that U.S. tariffs are likely to affect U.S. GDP by 40-50 bps along with higher input cost inflation,” it noted.
The report pointed out that signs of renewed inflation are already visible in the US, largely due to the pass-through effects of the tariff hikes and a weaker dollar. Import-sensitive sectors such as electronics, automobiles, and consumer durables are among the worst affected.
Inflation in the US is now projected to stay above the Federal Reserve’s 2% target through 2026, driven by supply-side factors linked to tariffs and currency movements, SBI said.
The US has levied tariffs on about $45 billion worth of Indian exports. Labour-intensive sectors such as textiles, gems, and jewellery are expected to feel moderate stress, while pharmaceuticals, smartphones, and steel exports remain relatively protected due to exemptions, existing tariff structures, and stable US demand.
The report warned that if all $45 billion of Indian exports were subjected to the new 50% duty, India’s trade surplus with the US could swing into a deficit. “However, we believe trade negotiations will restore confidence and improve exports to the U.S.,” it added.
It also highlighted the disparity in tariff rates: duties on Indian goods have been raised to 50%, compared with 30% on Chinese exports, 20% on Vietnamese, 19% on Indonesian, and 15% on Japanese products.
The US is India’s largest market for textiles, where India has steadily gained share over the past five years as China’s declined, reinforcing India’s role in the American supply chain. The US also remains the top market for India’s gems and jewellery exports, which account for nearly one-third of the sector’s $28.5 billion annual shipments.
With tariffs on these products now doubled from 25% to 50%, the report said exporters are bracing for major disruption.
According to the report, US GDP could take a 40-50 basis point hit from the new tariffs, alongside higher input cost inflation. “We believe that U.S. tariffs are likely to affect U.S. GDP by 40-50 bps along with higher input cost inflation,” it noted.
The report pointed out that signs of renewed inflation are already visible in the US, largely due to the pass-through effects of the tariff hikes and a weaker dollar. Import-sensitive sectors such as electronics, automobiles, and consumer durables are among the worst affected.
Inflation in the US is now projected to stay above the Federal Reserve’s 2% target through 2026, driven by supply-side factors linked to tariffs and currency movements, SBI said.
The US has levied tariffs on about $45 billion worth of Indian exports. Labour-intensive sectors such as textiles, gems, and jewellery are expected to feel moderate stress, while pharmaceuticals, smartphones, and steel exports remain relatively protected due to exemptions, existing tariff structures, and stable US demand.
The report warned that if all $45 billion of Indian exports were subjected to the new 50% duty, India’s trade surplus with the US could swing into a deficit. “However, we believe trade negotiations will restore confidence and improve exports to the U.S.,” it added.
It also highlighted the disparity in tariff rates: duties on Indian goods have been raised to 50%, compared with 30% on Chinese exports, 20% on Vietnamese, 19% on Indonesian, and 15% on Japanese products.
The US is India’s largest market for textiles, where India has steadily gained share over the past five years as China’s declined, reinforcing India’s role in the American supply chain. The US also remains the top market for India’s gems and jewellery exports, which account for nearly one-third of the sector’s $28.5 billion annual shipments.
With tariffs on these products now doubled from 25% to 50%, the report said exporters are bracing for major disruption.
You may also like
Rajasthan HC grants relief to SI Recruitment-2021 candidates: Overaged applicants can apply for 2025 vacancies
"If she comes back to Assam, she will be handled as per law": Assam CM warns social activist Syeda Hameed
Malayalam actor Rajesh Keshav in ICU after cardiac arrest
'It was my right as a citizen': Flag-burning veteran challenges Trump order; says 'will go to jail'
Raheem Sterling facing anxious wait as late Chelsea escape route emerges
