US reciprocal tariff may impact India exports only by 3-3.5%: SBI Research

A 15-20 per cent tariff increase by the United States on India as part of its reciprocal tariff plan would impact India’s shipments only in the range of 3-3.5 per cent, after factoring in exchange rate depreciation, State Bank of India (SBI) Research said in a report released on Monday.

 

US President Donald Trump last week announced his plans to impose country-specific reciprocal tariffs to address "unfair and unbalanced" aspects of bilateral trade. The US claimed that its average applied Most Favoured Nation (MFN) tariff on agricultural goods is 5 per cent, while India’s average applied MFN tariff is 39 per cent.

 

Holding that tariff reciprocity may turn out to be more of "white noise," SBI Research said even the expected impact should be negated through higher export goals, as India has diversified its exports portfolio, increased value addition, explored alternative markets, and worked on new trade routes spanning from Europe to the US via the Middle East, redrawing supply chain strategies to foster strategic inclusivity.

 

India and the US have set a new goal for bilateral trade under "Mission 500," aiming to more than double total bilateral trade to $500 billion by 2030.

 

The SBI report said while US tariffs on Indian exports have remained relatively stable, India's tariff adjustments appear to be more dynamic.

 

"The US tariff rate on Indian goods increased from 2.72 per cent in 2018 to 3.91 per cent in 2021, before slightly declining to 3.83 per cent in 2022. India's tariffs on US imports have risen from 11.59 per cent in 2018 to 15.30 per cent in 2022," it added.