US Tariff Impact: India's Exports May Drop $30 Billion, GDP May Take 0.8% Hit, Say Economists

US President Donald Trump announced a 26% tariff on Indian imports on Thursday, citing the country's higher tariff rates on American goods. The tariffs came into effect at midnight EST on Thursday, marking the move as one of the most aggressive in trade in recent history.

The impact of these tariffs in terms of export losses to the US is estimated at $30-35 billion for India, according to Dhiraj Nim, economist at ANZ. In terms of GDP growth, the impact is currently estimated at 0.7-0.8% of GDP, he said.

Madhavi Arora, lead economist at Emkay, said that previous static analysis suggests that India’s exports to the US could drop by $30-33 billion or about 0.8-0.9% of GDP at 26% tariffs, not adjusting for cross country hits.

The United States is India's top export destination, and single-handedly made up for 18.6% of India's merchandise exports in FY25, at $60,024 million for the first nine months of the ongoing fiscal, according to data from the Ministry of Commerce and Industry.

India’s exports to the US are only 4% of GDP, so direct impact is limited at about 20 basis points on real GDP growth, Gaura Sengupta, chief economist of IDFC First Bank, said. For India, the tariff imposed is 26%, which is higher than tariffs imposed by India on the US—as per WTO data—of 11.4%, she said. The tariffs are much higher than what would have been implied by reciprocal tariff differentials and likely include non-tariff barriers in the calculation, she said.

Beyond the India impact, there are also worries on the impact of global trade, with some economies likely to retaliate. Global trade will suffer and India will not be immune, Nim said, adding that these developments are a clear negative on growth.

Impact will be more from overall global growth slowdown and heightened global financial volatility, Sengupta also said, adding that the overall impact could be 50-60 basis points depending on how much global growth slows.

Negotiations will now begin and likely bring this tariff rate down to something more palatable, with the impact then estimated at about 0.2% of the GDP, according to Nim. For now, retaliation might not be the best measure.