Impact of Trump's Tariffs on GDP Expected to be Minimal: Insider Reports (0.2% Impact)
The United States has announced a 25% tariff on Indian exports, a move that is expected to have minimal economic impact on India. The tariff, announced amid stalled trade deal talks, is largely viewed as a pressure tactic by the US to secure favorable trade terms.
In the fiscal year 2024-25, the India-US bilateral trade volume was $131.8 billion, with India exporting $86.5 billion and importing $45.33 billion. Due to existing Section 232 exemptions in the US, over half of India’s exports (pharmaceuticals, electronics) are exempt from these tariffs, leaving only about $40 billion of exports exposed to the 25% duty.
India has firmly indicated that agriculture, dairy, and genetically modified (GM) food products are “no-go areas” for duty concessions during trade negotiations. Religious and cultural considerations make the dairy sector especially sensitive from India's perspective. The US dairy sector has concerns related to animal feed regulations that India has not agreed to relax, complicating the trade talks.
Despite the tariff, negotiations for a bilateral trade deal with the US are ongoing and moving in the right direction. The US is India's largest trading partner and has been so for four years. An interim deal between India and the US is likely by October, according to sources.
The government has stated it will act to secure national interest and remains committed to the welfare of farmers, entrepreneurs, and MSMEs. Farmers' interests will not be compromised, and the government will not allow the import of genetically modified crops.
The tariff's potential impact on India's economy is expected to be 'negligible', with a potential GDP loss of 0.2% or less. The potential GDP loss, if realized, would amount to Rs 330.68 lakh crore nominal in FY 2024-25. Agriculture and allied sectors contribute less than 20% to India's GDP, but employ nearly half of the country's 144 crore population.
The website is now available on WhatsApp channels for the latest updates on the India-US trade deal. The negotiations have been ongoing with the mutual goal of reaching a fair, balanced, and mutually beneficial bilateral trade agreement, but the tariff imposition signals friction in the talks. The tariffs appear more as leverage in difficult negotiations, with critical sticking points being agricultural and dairy sectors that India protects strongly due to domestic considerations.
- The tariff on Indian exports by the United States, although expected to have a minimal economic impact on India, is seen as a pressure tactic in the ongoing trade deal negotiations, with the potential to increase friction in the talks.
- India's exports to the US in the fiscal year 2024-25 amounted to $86.5 billion, with over half exempt from the 25% tariff, leaving only about $40 billion of exports exposed to the duty.
- The ongoing trade negotiations between India and the US, despite the tariff implementation and the critical sticking points in the agricultural and dairy sectors, are progressing, with an interim deal likely by October.
- The government's commitment to securing national interest includes ensuring the welfare of farmers, entrepreneurs, and MSMEs, and it has stated that it will not allow the import of genetically modified crops or compromise farmers' interests.
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