Tariffs On Indian Exports May Backfire On US, Higher Inflation And Slower Growth Likely: Report

The United States’ decision to slap 50 per cent tariffs on Indian goods could end up hurting its own economy, according to an assessment by the State Bank of India (SBI).

The bank’s analysis suggests the move could knock 40–50 basis points off US GDP growth and fuel inflationary pressures well beyond the Federal Reserve’s 2 per cent target, IANS reported.

“We believe that US tariffs are likely to affect US GDP by 40-50 bps along with higher input cost inflation,” the report stated.

Import-heavy sectors such as electronics, automobiles and consumer durables are expected to face higher costs, while a weakening dollar could further magnify price rises.

The study projects that US inflation will remain above target at least until 2026, driven by tariff pass-through and exchange rate shifts.

The duties apply to around $45 billion worth of Indian exports, doubling levies on labour-intensive products like textiles, gems and jewellery to 50 per cent.

These two categories together account for nearly a third of India’s $28.5 billion in annual shipments to the US.

Although pharmaceuticals, smartphones and steel are somewhat shielded due to exemptions and steady domestic demand, exporters in other industries are bracing for disruption.

SBI cautioned that if the full range of Indian exports is hit, New Delhi’s current trade surplus with Washington could slip into deficit.

Nonetheless, it expressed confidence that negotiations would eventually restore confidence and improve exports to the US.

The report also highlighted the disparity in tariff levels: Indian products now face the steepest rate at 50 per cent, compared with 30 per cent on Chinese goods, 20 per cent on Vietnamese, 19 per cent on Indonesian and 15 per cent on Japanese exports.

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