Economists estimate that the proposed 27% additional tariffs on Indian exports to the US could shave 30-90 basis points (bps) off India’s GDP growth this fiscal year.
Tanvee Gupta Jain, chief economist at UBS Securities, said,“Our base case GDP growth forecast for FY26 is 6.3%, which already incorporates a 25 bps drag from tariff hikes. However, the sheer magnitude of the newly proposed tariffs suggests further downside risks, potentially lowering growth by another 30-55 bps.”
The US accounts for 18% of India’s goods exports, which equates to about 2% of GDP. The economic impact will depend on whether these tariffs are implemented, how long they remain in place, and whether negotiations lead to reductions.
Gupta Jain highlighted two primary ways in which the tariff wars could impact India. First, slower global growth leading to weaker external demand could dampen business sentiment and investment; and India’s lower exposure to global trade than other Asian economies making it less vulnerable but not immune. “India’s reliance on services exports — currently 47% of total exports—could provide some cushion against global trade disruptions,” she says. Madhavi Arora, chief economist at Emkay Global, sees an even larger impact, estimating that GDP growth could be hit by 80-90 bps, translating to a loss of $30-33 billion in exports to the US, even before considering cross-country trade responses. “Our previous static analysis suggested that at a 27% tariff rate, India’s exports to the US could decline by $30-33 billion or 0.8-0.9% of GDP,” Arora noted.
She pointed out that China’s response to the tariffs could create additional risks for India. “China’s reaction to these trade restrictions, mainly in terms of its excess industrial capacity and potential dumping in Asian markets, could impact India. While we negotiate with the US and other trade partners, we may need to guard against Chinese responses, which could hurt domestic industries and create a disinflationary impact,” she warned.
Morgan Stanley sees a 30-60 bps downside risk to its India growth estimate of 6.5% for FY26. In a note released on Thursday, the firm stated, “With goods exports to the US at 2.1% of India’s GDP (1.7% excluding energy and pharma, which are exempt from tariff hikes), the direct impact may be less severe. However, a slowdown in US growth and weak global trade momentum could dampen external demand.” Morgan Stanley emphasised that corporate sentiment will be a key factor. “The bigger impact may come from indirect channels — lower corporate confidence could dent risk appetite and further delay the capex cycle.”
