Advantage India as US tariff hikes give nation an edge over Asian peers, says SBI report

New Delhi: The recent 27 percent tariff hike imposed by US President Donald Trump on Indian goods is expected to have only a "limited" impact on India’s economy, as exports to the US account for just 4 percent of the country's GDP, according to an SBI Research report released on Friday.

Despite the tariff increase, India has a relative advantage over its Asian counterparts, as the levies imposed on Indian goods are lower compared to China (34 percent), Thailand (36 percent), Indonesia (32 percent) and Vietnam (46 percent). This lower tariff burden is expected to enhance India's competitiveness in certain export sectors over the long term.

"We expect India will have a competitive advantage and export-oriented impact on various sectors," the report stated.

Countries reliant on textile exports, such as Bangladesh, China and Vietnam, are expected to face reduced demand due to inflationary pressures. While India's textile exports to the US stood at approximately $7 billion between April and December in FY25, the sector may experience short-term setbacks. However, the long-term outlook remains positive as India seeks to expand its market share.

The engineering goods sector could face major challenges due to supply chain disruptions and potential declines in export revenue.
In electronics, India is better positioned than major exporting nations, with China facing tariffs ranging from 54 to 79 percent. India’s electronics exports to the US, which amounted to roughly $9 billion in April-December FY25, account for 15 percent of total exports—giving it a competitive edge in this sector.

The gems and jewellery industry is expected to bear the brunt of the tariff changes, as import duties on loose diamonds may rise from zero to 20 percent, while gold jewellery tariffs could increase from the current 5.5-7 percent. The US represents a major market for India’s gems and jewellery exports, contributing $10 billion or 30.4 percent of the sector’s total annual exports of $32 billion, the report highlighted.

Agricultural exports, on the other hand, are likely to remain stable or see growth, as competing nations face steeper tariffs. India’s seafood exports to the US reached $1.5 billion during April-December FY25, accounting for 3 percent of total exports to the country.

The SBI report suggests that India’s relative tariff advantage will help its seafood exporters, as consumption will not decline instantly.
India’s exports to the US have been on a downward trend since FY23, with their share in total exports ranging between 17 and 18 percent. The top 15 export categories to the US accounted for 63 percent of total shipments, according to the report.

However, the report emphasized that the broader impact on India’s economy will stem from "overall slowdown in global growth and heightened global financial volatility due to the worldwide hike in tariffs."

IANS