Trump’s tariffs on India could slash US GDP by 40-50 bps, warns SBI
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New Delhi: As Indian exporters prepare for the impact of additional US tariffs, reports suggest that President Donald Trump's decision to impose an extra 25 per cent tariff on key goods, effective Wednesday, could weigh on the US economy, potentially reducing GDP by 40–50 basis points while triggering inflationary pressures.
According to a report by SBI Research, US inflation is expected to remain above the 2 per cent target through 2026, largely driven by supply-side effects of tariffs and fluctuations in the exchange rate.
"The US is beginning to show signs of renewed inflationary pressure, driven by the pass-through effects of recent tariffs and a weaker dollar—particularly in import-sensitive sectors such as electronics, autos, and consumer durables," the report said.
The steep tariffs on Indian goods are anticipated to slow growth and raise input costs, further pressuring the American economy, SBI noted.
"We believe that US tariffs are likely to affect US GDP by 40–50 basis points and result in higher input cost inflation," the report added.
Speaking at the Federal Reserve’s annual conference in Jackson Hole, Fed Chair Jerome Powell highlighted the challenge of balancing rising prices with risks to the fragile job market, noting that the impact of higher tariffs on prices is "now clearly visible."
US wholesale prices rose nearly 1 per cent in July, marking the fastest increase in more than three years as the ongoing tariff war drove up costs. The Producer Price Index increased 3.3 per cent year-on-year, with notable price hikes in services, processed goods, and tariff-heavy imports such as furniture and apparel.
Economists warn that without a rollback of tariffs, American families could face mounting budgetary pressures.
Earlier, the US Department of Homeland Security circulated a draft notification announcing the additional 25 per cent tariff on Indian goods, citing efforts to address "threats to the United States by the Government of the Russian Federation." This comes on top of the earlier 25 per cent tariff, with certain items like electronics and pharmaceuticals exempted.
With IANS inputs
