India Reviews US Reciprocal Tariffs: Economic Impact&Trade Strategies

Ira Singh
Khabar Khabaron bKi,04 April’25

India is closely assessing the recent tariff hike imposed by the United States and its potential impact on the domestic economy, Minister of State for Finance Pankaj Chaudhary said on Thursday. Speaking at an event organized by the Pension Fund Regulatory and Development Authority (PFRDA), he reportedly emphasized that while the US prioritizes its economic interests under the “America First” policy, India remains committed to an “India First” approach.”The impact of the reciprocal tariffs announced by the US is being evaluated,” he stated.

US Tariffs and Their Impact on Indian Exports
The US government has imposed a 27% reciprocal tariff on Indian imports, citing high duties levied by New Delhi on American goods. This move aims to reduce trade imbalances and bolster US domestic manufacturing. The tariff hike is expected to affect India’s export-driven industries, though experts suggest India is in a relatively stronger position compared to other nations facing similar levies.

GDP Growth and Export Slowdown
Economists predict that the tariff revisions could reduce India’s GDP growth by up to 50 basis points, bringing it down to approximately 6% from the earlier projection of 6.5%. Additionally, India’s exports to the US may decline by 2-3% this fiscal year.According to EY Chief Policy Advisor D K Srivastava, “The maximum adverse impact on India’s GDP growth will not exceed 50 basis points. Without retaliation, growth may slow to 6%.” A senior economist at a global financial institution estimated that a 20% effective tariff increase on Indian exports to the US could result in a GDP loss of 35-40 basis points. However, the final impact will depend on ongoing trade negotiations and potential adjustments in trade policies.

Industry Response and Potential Trade Adjustments
Industry experts suggest India could mitigate the impact by rebalancing its trade strategy. Increasing imports from the US—especially in crude oil, gas, and high-end technology sectors such as aircraft and defense—could help narrow the trade surplus and reduce tariff pressure.

A trade policy analyst recommended that India adopt a country-specific and commodity-specific tariff structure for US imports, lowering non-essential high tariffs. Some tariffs on US goods are considered symbolic and have minimal impact on India’s domestic market.Despite the tariff hikes, key sectors such as pharmaceuticals, semiconductors, copper, and energy-related imports—including oil and liquefied natural gas (LNG)—have been exempted. However, Indian exports in steel, aluminum, and automobiles continue to face a 25% tariff in the US. Additionally, a 10% baseline tariff on other Indian goods will take effect from April 5-8, increasing to 27% from April 9.

The Need for Policy Recalibration
Market analysts believe this development underscores the need for India to reassess its trade and tariff policies. A senior financial strategist highlighted that while India liberalized tariffs in the 1990s, it still maintains one of the highest tariff structures globally. There is growing consensus on the need to strike a balance between protecting domestic industries and enhancing global trade competitiveness.Experts emphasize that long-term solutions lie in strengthening trade partnerships, improving ease of doing business, and diversifying export markets to counteract protectionist measures.