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How much could India lose if Donald Trump imposes 25% tariff and Russian oil imports penalty?
Donald Trump said on Tuesday that he will increase the 25% tariff on Indian exports to the US “substantially over the next 24 hours".
India could risk losing its competitive edge in nearly $64 billion worth of exports to the United States if President Donald Trump goes ahead with a proposed 25% tariff and an additional 10% penalty over Russian oil imports, Reuters reported, citing four sources familiar with an internal government assessment.
India and the US are engaged in a serious diplomatic crisis, with Donald Trump saying on Tuesday that he will increase the 25% tariff on Indian exports to the US “substantially over the next 24 hours".
Last week, the US President lumped India with Russia as “dead economies", criticising the country for its trade barriers and continued purchases of Russian weapons and energy.
A relatively low share of exports in India's $4 trillion economy is seen limiting the direct impact on growth to 40 basis points.
On Wednesday, the Reserve Bank of India left its GDP growth forecast for the current April-March financial year unchanged at 6.5% and held rates steady despite the uncertainty created by tariff hikes.
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Trade impact
According to the Reuters report, the trade impact estimates were prepared by the Indian government after Donald Trump announced the unexpectedly high tariff for Indian goods and the penalty.
The Indian government, in its assessment report, has assumed a 10% penalty for buying Russian oil, taking the tariff to 35%, the four Indian government, the report further claimed.
Trump said on Wednesday his administration will decide on the penalty for buying Russian oil post the outcome of US efforts to seek a last-minute breakthrough in the Ukraine war.
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The impact of the tariff and possible penalty will be on nearly $64 billion worth of India’s exports to US that account for about 80% of total exports to the country, and it will lead to "potential export losses" due to price disadvantages, the sources was quoted as saying.
What RBI governor said
Addressing the media, RBI governor Sanjay Malhotra said India contributes more to global growth than the US, responding to Donald Trump’s recent remark dismissing the South Asian nation as a “dead” economy.
“We have a very robust growth rate,” Malhotra told reporters after a policy meet on Wednesday.
“We are contributing about 18% which is more than the US, where the contribution is expected to be much less at about 11% or something. We are doing very well, and we will continue to further improve.”
Malhotra also cited the latest growth forecasts by the International Monetary Fund, which had estimated economic expansion of 6.4% for India and 1.9% for the US in 2025.
India's goods export to US
- India exported goods estimated at around $81 billion in 2024 to the US, including garments, pharmaceuticals, gems and jewellery, and petrochemicals, according to government data.
- India's goods exports to the US constituted 2% of GDP in 2024. Its total goods exports globally were at $443 billion in 2024.
- The proposed tariffs on India's high-value exports face "erosion of price competitiveness encountering intensified rivalry from countries subject to lower duties," two sources said, citing the internal assessment.
(With inputs from Reuters)
