50% tariffs on India to blow back on Trump? US GDP could shrink 40–50 bps, inflation to flare: SBI report

NEW DELHI: The recent US decision to impose steep tariffs on Indian goods could boomerang on the American economy by pushing up inflation and shaving growth, according to an analysis by the State Bank of India (SBI). The report, quoted by ANI, estimates that US GDP could be reduced by 40–50 basis points as a result of the new duties, while inflationary pressures are likely to rise due to higher input costs and a weaker dollar. “We believe that US tariffs are likely to affect US GDP by 40-50 bps along with higher input cost inflation,” the report noted. Import-dependent industries such as electronics, automobiles and consumer durables are already feeling the pinch.

The SBI analysis projected that inflation in the US will stay above the Federal Reserve’s 2 per cent target through 2026, driven by tariff pass-through and exchange rate movements.Also read: India prepares multi-pronged strategy to shield economy The US has imposed tariffs on about $45 billion worth of Indian exports. Labour-intensive sectors such as textiles, gems and jewellery are expected to face significant disruption, though pharmaceuticals, smartphones and steel remain relatively shielded by exemptions and steady domestic demand.

SBI warned that if the 50 per cent tariffs extend to all $45 billion of Indian shipments, New Delhi’s trade surplus with Washington could potentially flip into a deficit. “However, we believe trade negotiations will restore confidence and improve exports to the US,” the report added. The analysis also pointed out that while Indian goods now face the steepest levy at 50 per cent, comparable US duties on Chinese products stand at 30 per cent, Vietnamese at 20 per cent, Indonesian at 19 per cent and Japanese at 15 per cent. The US remains India’s largest market for textiles — where New Delhi has steadily gained share as China’s presence has declined — and for gems and jewellery, which account for nearly one-third of India’s $28.5 billion annual shipments. With tariffs on these products doubling from 25 per cent to 50 per cent, exporters are bracing for significant disruption, SBI cautioned.Also read: Fiji PM Rabuka backs India amid 50% US tariffs; calls PM Modi ‘big enough to weather discomforts’