New Delhi [India]: The impact of U.S. tariff reciprocity on Indian exports is expected to be minimal despite concerns over trade restrictions, according to a report by the State Bank of India (SBI).
The report indicates that even if the U.S. imposes higher tariffs in the range of 15-20%, the overall decline in Indian exports to the U.S. is estimated to be only around 3-3.5%.
“Our estimates show overall incremental tariff levels even at 15-20 per cent imposed by USA would still limit the impact on exports to US only in the range of 3-3.5 per cent which again should be negated through higher export goals,” the report stated.
Experts believe this potential impact can be offset by India’s strategic export diversification, increased value addition, and exploration of new trade routes.
India’s Shifting Trade Strategy
The U.S. remains India’s top export destination, accounting for 17.7% of total exports in the financial year 2023-24. However, India is actively working to reduce dependence on any single market.
With increasing trade ties in Europe, the Middle East, and other regions, India is strengthening its supply chain networks to ensure export stability.
While U.S. tariffs on Indian goods have remained relatively stable, India’s tariff policies have been more dynamic. The report highlights that the U.S. tariff rate on Indian goods increased from 2.72% in 2018 to 3.91% in 2021 before slightly decreasing to 3.83% in 2022. Meanwhile, India’s tariffs on U.S. imports rose significantly from 11.59% in 2018 to 15.30% in 2022.
Focus on Value-Added Exports
This shift in tariff structures reflects India’s more assertive trade policy, aimed at balancing trade relations while protecting domestic industries. India has been focusing on adding value to its exports, transitioning from raw materials to finished goods and high-value products.
This strategy enhances export earnings and reduces the impact of tariff hikes, ensuring that Indian goods remain competitive in global markets.
Strengthening Supply Chains
The report also highlights India’s efforts to develop alternative trade routes connecting Europe, the Middle East, and the U.S. to reduce logistical costs and improve efficiency. This restructured supply chain approach is expected to strengthen India’s position in international trade despite global uncertainties.
Overall, while potential U.S. tariff hikes remain a concern, India’s proactive trade policies, export diversification, and supply chain realignment are expected to mitigate the impact, ensuring steady export growth in the long run.