A recent SBI Research reveals that the US tariffs on Indian exports are set to reshape trade dynamics, although the long-term consequences for both economies will depend on how each country adapts to this new economic landscape.
Higher Tariffs Will Impact US More Than India
Further, SBI Research claims in a report on August 1 that the 25 percent tariff on Indian goods that Trump announced is expected to have more significant economic implications for America than for India.
It appears that the impact of these tariffs may ultimately be more detrimental to the US economy than to India’s as per this report.
These newly launched tariffs are set to take effect from August 7 and it will come alongside the penalties for the purchase of Russian crude oil and military equipment.
Moving ahead, the SBI Research termed the imposition of these tariffs a “bad business decision” in its paper.
Why Would This Happen?
According to this research, the ramifications for the US economy could include a reduced GDP, increased inflation and a weakened dollar.
Further suggesting that the US is already experiencing renewed inflationary pressures, primarily due to the recent tariffs and a declining dollar.
They are claiming that this inflation is expected to remain above the 2 percent target until at least 2026.
The report indicates that the financial burden of these tariffs is projected to be substantial for US households, costing an average of $2,400 in the short term owing to the increased prices.
They are anticipating that the low-income families may see losses of approximately $1,300.
In case of the higher earners, they might face a hit of up to $5,000, although their overall financial stability may be less affected.
Considering the potential challenges posed by these tariffs, India has diversified its export markets.
So far, the US is India’s largest export destination, accounting for 20 per cent of total exports, the top ten countries represent only 53 percent of India’s overall export activity.
Nearly half of India’s exports to the US from the key sectors such as electronics, gems and jewellery and pharmaceuticals make up.
Prior to this, tariffs on these goods varied significantly, with some products facing tariffs as low as zero per cent.
But the newly launched changes on all these
sectors will be impacted by the new 25 per cent tariff.
The report is anticipating that this shift may lead to drug shortages and price increases in the US market.
The report says that the pharmaceutical sector is particularly vulnerable, as 40 per cent of India’s pharma exports are directed towards the US.
