Trump's tariff hike could shave 0.3 pp off India's GDP: Goldman Sachs

India condemns new 25% duty on exports; total levy now at 50%; analysts expect talks before August 27 deadline

India’s economy could take an additional 0.3 percentage point (pp) annualised hit to real gross domestic product (GDP) growth following US President Donald Trump’s decision to impose a fresh 25 per cent duty on Indian imports, Goldman Sachs said. This is over and above the 0.3 pp impact previously estimated from the April 2025 tariff round. 

 

According to Goldman Sachs, once exclusions, such as those under Section 232 of the US Trade Expansion Act, 1962, are applied, the effective average tariff rate on Indian exports to the US will settle at around 32 per cent. 

 

US doubles tariff on Indian goods

On Wednesday evening, Trump issued an executive order imposing an additional 25 per cent duty on Indian imports. This brings the total levy to 50 per cent, effective August 27.

 

The new measure, the order stated, was triggered by India’s continued crude oil purchases from Russia. 

 

India’s US exposure significant

India’s exposure to the US market is substantial. Around 4 per cent of India’s GDP is linked to final demand from the United States, Goldman Sachs analysts noted.

 

In FY25, India exported goods worth $86.5 billion to the US, while imports stood at $45.7 billion. Key exports include electronics, chemicals, pharmaceuticals, and textiles, while major imports are crude oil, gems and jewellery, and machinery.

 

Russian crude oil: A flashpoint in India-US trade relations

One major point of tension is oil. While Russia provided about one-third of India’s crude oil in FY25, the US share was just 4 per cent. That share did rise to 8 per cent in April and May 2025, but the US remains a minor supplier overall.

 

MEA terms move 'unfair'

India’s Ministry of External Affairs (MEA) called the US action “unfair, unjustified, and unreasonable.” It said India’s energy sourcing was guided by market pricing and supply security.

 

“It is extremely unfortunate that the US has chosen to penalise India for decisions being made by several other countries in their own national interest,” the MEA said in a strongly worded statement.

 

PM Modi: Farmers, fishers, dairy will not be sacrificed

Addressing the MS Swaminathan Centenary International Conference on Thursday, Prime Minister Narendra Modi asserted that India would not compromise on the interests of its farmers, fishers, or dairy industry.

 

“The interest of our farmers is our top priority… I know that I will have to pay a heavy personal price for this. But I am ready for it,” the Prime Minister said.

 

Room for negotiations remains

Goldman Sachs has not revised its India GDP forecast yet, but flagged the possibility of further impact if retaliatory actions or broader trade restrictions follow.

 

“There is a window for negotiation,” the report said, pointing to the three-week gap before the new tariffs come into effect.

 

A day earlier, the Reserve Bank of India (RBI) held its FY26 GDP growth projection steady at 6.5 per cent, citing a lack of sufficient data to warrant revisions. RBI Governor Sanjay Malhotra, speaking after the Monetary Policy Committee (MPC) meeting, said, “We do not have sufficient data to revise our GDP forecast,” adding that global uncertainties had already been factored into earlier projections.