With US President Donald Trump asserting that the nation will seemingly impose a 25 per cent tariffs on vehicle, semiconductor and pharmaceutical imports, Goldman Sachs stated that the “reciprocal tariff” plan is anticipated to influence India in 3 ways: a) Nation-level reciprocity, b) Product-level reciprocity, and c) Reciprocity together with non-tariff obstacles. Earlier on Tuesday, a Bloomberg report acknowledged that Trump introduced the seemingly imposition of tariffs on the imports from aforementioned sectors, with an announcement coming as quickly as April 2.
India’s bilateral items commerce surplus with the US has doubled in stage phrases over the past 10 years to $35 billion, equal to round 1.0 per cent of India’s GDP, in FY24. This was largely pushed by a rise in commerce surplus in electronics, pharmaceutical merchandise, and textiles.
Goldman Sachs maintained that India’s tariff charges are greater than the US on most merchandise (6.5pp on a trade-weighted common foundation), with the differential being the best in agricultural merchandise, textiles, and pharmaceutical merchandise.
India’s gross exports to the US is likely one of the lowest amongst its EM friends at round 2.0 per cent of GDP. Goldman Sachs stated, “We estimate a possible home GDP development influence of 0.1-0.3pp beneath completely different eventualities of enhance in common US efficient tariff charge on Indian exports (beneath country-level reciprocity and product-level reciprocity), and completely different estimates of value elasticity of US demand for Indian exports. Nevertheless, in case of worldwide tariffs on all nations from the US, India’s home exercise publicity to US ultimate demand can be roughly twice as excessive (~4.0 per cent of GDP) given publicity to the US by way of exports to different nations, and would seemingly lead to a possible home GDP development influence of 0.1-0.6pp.”
Three-way influence on India
Per an evaluation report by Goldman Sachs, beneath Trump’s “reciprocal tariff” plan, there are 3 ways wherein India can get impacted:
a) Nation-level reciprocity, with a rise in tariffs on all US imports from India by the weighted common tariff differential. “Beneath this state of affairs, the typical US efficient tariff charges on Indian imports would enhance by ~6.5pp. As per our US economics crew, this is able to be the best strategy for implementation of “reciprocal tariffs” because the officers may apply one uniform charge for every nation on prime of the pre-existing tariff charges,” the report acknowledged.
b) Product-level reciprocity, the place the US matches India’s tariffs on every product imported from India. Goldman Sachs estimates this may increasingly enhance the typical tariff differential by roughly 11.5pp, however can be extra difficult with an extended implementation timeline. “As per the memo launched by the White Home on February 13, the White Home Workplace of Administration and Price range (OMB) is meant to submit a report inside 180 days to the President,” the brokerage agency stated.
c) Reciprocity together with non-tariff obstacles like administrative obstacles, import licenses, export subsidies, and many others. This, in keeping with Goldman Sachs, is probably the most difficult given the price of estimating non-tariff obstacles, however may presumably result in greater tariffs than in different two eventualities.
Tariff charges: India vs the US
Tariff charges imposed by India are greater than the US on most merchandise, with the differential being the best in agricultural merchandise, textiles, and pharmaceutical merchandise.
Here’s a have a look at the information from the World Built-in Commerce Answer (WITS) database for product stage tariffs obtainable until 2022.
