New Delhi [India], April 4 : US President Donald Trump has announced a steep 27 per cent tariff on imports of Indian goods, triggering concern across global markets and trade analysts.
International brokerage firms have warned of negative impacts on both the Indian and the US economies. The move also draws sharp reactions globally.
According to Deloitte, India's textiles and apparel exports, which were valued at over USD 8 billion in 2024, are likely to be severely affected. These products typically operate on thin margins and are highly price-sensitive. A 10-20 per cent rise in tariffs alone can make Indian textiles uncompetitive compared to countries with more favourable trade deals.
It said "Indian exporters face the prospect of a significantly higher ad valorem duty of 27 percent with effect from 9 April 2025".
In addition, India's exports of fish, shrimp, non-basmati rice, vegetable extracts and oilsworth around USD 5 billionare also expected to be impacted by the new tariffs.
For electronics exports such as smartphones, routers and switches may also take a hit. While the US currently imposes zero tariffs on these products, India's reciprocal tariffs range from 0 to 20 per cent. Any hike in tariffs could reduce the competitiveness of Indian electronics in the US market.
Although automobiles and auto components are largely exempt from the new ad valorem duty, they are covered under earlier trade proclamations and could still face a 25 per cent tariff.
On the effect of tariffs on the US economy, ASK Private Wealth noted that the move could lead to heightened economic uncertainty, potentially triggering stagflation in the US, where inflation remains high amid stagnant growth.
It said "Impact: Higher uncertainty; chances of retaliation and rollback". They also warned that these reciprocal tariffs could raise trade barriers to levels not seen since the 1800s.
Brokerage firm UBS, in its report, said that while there's a 50 per cent chance that the tariffs might be reduced by the end of the year, the short-term impact would likely slow down the US economy, bringing 2025 growth down to around 1 per cent.
UBS said "Even if tariffs are ultimately reduced by year-end, the near-term shock and associated uncertainty is likely to drive a near-term slowdown in the US economy"
In a more negative scenario, if the tariffs remain or escalate further, UBS predicts a potential US recession and significant interest rate cuts by the Federal Reserve.
Meanwhile, Jefferies offered a more optimistic view, noting that the tariffs did not directly impact major Indian export sectors like IT services, pharma and automobiles. The firm described the 27 per cent tariff as "reasonable" when seen in a global context.
Jefferies said "the 27 per cent tariff on India is looking reasonable from a relative perspective. Bigger worries are on weaker US economic outlook, which is a -ve for IT services and other exporters. However, it warned that a weakening US economy could hurt demand for Indian exports, especially in IT services".
The situation continues to evolve, with the global economic community closely watching how the US, India and other major economies respond in the coming weeks.
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