Donald Trump's Tariffs Won’t Cripple India’s Exports To The US, SBI Report Finds

A new report from SBI Research, released on Monday, suggests that the impact of US President Donald Trump's potential tariffs on Indian exports could be limited. The research estimates that reciprocal tariffs, if imposed, might reduce India's exports to the US by just 3-3.5 per cent. However, the report also states that this decline could be offset by India's diversified export portfolio.

"The expected decline in exports to the US due to tariffs could range between 3-3.5 per cent, but this is likely to be balanced by an increase in exports from India across various sectors, including manufacturing and services. India's diversified exports, value-added products, and efforts to explore new markets and routes from Europe to the US via the Middle-East will play a key role in mitigating the impact," the SBI Research report stated.

The report also highlights India's potential advantage over Trump's 25 per cent tariffs on steel and aluminium imports, which came into effect on March 13. India has a trade deficit of $13 million in aluminium and $406 million in steel trade with the US, and this situation could offer opportunities for India.

Additionally, SBI Research notes that geopolitical shifts, including the US tariff war, are influencing India's Free Trade Agreement (FTA) strategies. India is negotiating FTAs with countries like the UK, Canada, and the EU, with a focus on sectors such as services, digital trade, and sustainable development. An FTA with the UK alone is expected to increase bilateral trade by $15 billion by 2030. The report further predicts that the digital economy could add $1 trillion to India's GDP by 2025.

On the US economy, the report indicates a potential slowdown. It highlights declining US GDP growth, slowing exports and consumption, and a reduction in total factor productivity (TFP) growth. The report also points out that high wages in the US might limit new investments and that the net savings to GDP is at its lowest level since 2011.

SBI Research concluded that the current US tariff policy might cause short-term challenges, but it is unlikely to significantly accelerate US GDP growth.

Regarding Foreign Institutional Investment (FII) in India, the report mentioned that while FY25 is expected to see FII outflows, India saw inflows of $41 billion in FY24, the highest since FY16. The report also noted strong inflows into various sectors in the past three years, indicating robust growth potential in the Indian market.