New Delhi: India’s exports to the US constitute only 4 per cent of its GDP so the direct impact of the 27 per cent hike in tariffs on Indian goods announced by President Donald Trump will have only a “limited” impact, according to an SBI Research report released on Friday.
At the same time, the tariffs levied on India are the lowest among its Asian peers, compared to 34 per cent on China, 36 per cent on Thailand, 32 per cent on Indonesia, and 46 per cent on Vietnam. This is expected to give India a comparative advantage over these countries and result in an increase in exports in some sectors over the long term, the report stated.
“We expect India will have a competitive advantage and export-oriented impact on various sectors,” the SBI report said.
The higher tariff on textile export-oriented countries like Bangladesh, China, and Vietnam may lead to lower demand due to inflationary pressures. However, in the long term, India stands to benefit as it endeavours to corner a larger share of the market. India’s exports of textile products to the USA was around $7 billion during April-December, FY25. So, this sector may be impacted negatively in the short-run but may have a positive impact in the long-run, according to the report.
The engineering goods sector may be severely impacted due to disruption in the supply chain and the cutting of export revenues.
In electronics, China has a tariff of 54 per cent to 79 per cent, so India has a better position compared to the key electronics exporting countries. India’s exports of electronics to the US were worth around $9 billion during April-December of FY25, and hold the highest share of 15 per cent in total exports.
The gems and jewellery sector will be the most affected as import tariffs may be up to 20 per cent from the current zero per cent on loose diamonds and 5.5-7 per cent on gold jewellery. The US accounts for nearly $10 billion or 30.4 per cent of India’s annual gems and jewellery exports of $32 billion, the report points out.
India’s agricultural exports to the US are expected to remain stable or even grow, as competing nations face steeper duties. India’s seafood exports to the US stand at $1.5 billion during April-December, FY25, which constitutes a 3 per cent share of total exports to the US. India’s relative tariff advantage will help India’s seafood exporters, as consumption will not decline instantly, the SBI report states.
India’s exports to the US are on a declining trend since FY23 with the share in total exports around 17-18 per cent. The top 15 items exported to the US accounted for 63 per cent of total exports, the report points out.
The impact on the Indian economy will be more from overall slowdown in global growth and heightened global financial volatility due to the worldwide hike in tariffs, it added.
(IANS)
