US Tariffs Threaten India's Economic Growth

The potential impact of an additional 25% tariff announced by US President Donald Trump on goods imports from India could significantly affect economic growth and employment, economists warn. If implemented after the August 27 deadline, the tariffs could have a more pronounced effect than initially estimated.

Initial Estimates Underestimated the Impact

Initial assessments suggested that the first 25% tariff on Indian exports would only slightly impact growth, reducing it by 0.2-0.4 percentage points. However, the additional tariff could now harm key export sectors, affecting overall economic sentiment.

Opportunity for Negotiations

A window for dialogue remains open, with a US delegation expected in India on August 25. These talks could potentially mitigate some of the tariff burdens.

Goldman Sachs Adjusts Growth Forecasts

Goldman Sachs highlighted the potential for further growth impacts due to the additional tariffs, estimating an incremental drag of around 0.3 percentage points on India's real GDP growth. Despite this, the firm has not yet adjusted its growth forecasts for 2025 and 2026, citing a three-week negotiation window before the new tariffs take effect.

Calls for Reform Intensify

The announcement has sparked outrage and calls for aggressive reforms, including improvements in the ease of doing business, GST revamp, labor reforms, and privatization. Prominent figures like industrialist Anand Mahindra and Ficci president Harsha Vardhan Agarwal see this as an opportunity to drive significant economic reforms and boost tourism as a foreign exchange engine.