India to face relatively limited impact from US tariffs: Report

Despite India having the highest tariff differential of 9 per cent with the United States among major nations, the reciprocal tariffs’ impact will be only on 1.1 per cent of India's gross domestic product (GDP) as its exports to the United States in the six most vulnerable sectors amount to only 1.1 per cent of its GDP, the report said.

"With a tariff differential of 9 per cent and assuming that the elasticity of India's exports to the US with respect to tariffs is minus 0.5 (implying a 1 per cent rise in the tariff rate would reduce India's exports to the US by 0.5 per cent), there will be a loss of $3.6 billion in exports to the US, which is only 0.1 per cent of India's GDP," said the report.

India-US trade was worth $124 billion last year. Exports from India to the US reached $81 billion, while imports from the former to the latter amounted to $44 billion, resulting in a trade surplus of $37 billion for India in 2024.

"Notably, India faces the largest tariff gap if compared with other major nations. However, the US' trade deficit with India (or India's surplus with the US) is only the 10th highest among the US' trading partners, which might cushion it from specific targeting, in contrast to Mexico, Canada, and China," it noted.

India's goods trade surplus with the United States has witnessed a two-fold increase in the past decade, rising from $9 billion, 0.9 per cent of India's GDP in 2015 to $37 billion, 1 per cent of GDP in 2024.

Higher exports of textiles is also partly responsible for driving India's trade surplus with the United States over the past decade.

ALCHEMPro News Desk (DS)