Trump's 25% tariff on India could drag down GDP growth by 50-60 basis points, say analysts

US President Donald Trump could deliver a hit of 50-60 basis points to the Indian GDP growth with tariffs and penalties, according to analysts.

Trump on Thursday formally imposed 25 per cent tariff on India. He has also previously threatened additional penalties over India’s trade with Russia.

Previously, the Reserve Bank of India (RBI) had projected the Indian economy to grow at 6.5 per cent in 2025-26. The Union Finance Ministry had projected the economy to grow in the 6.3-6.8 per cent range.

With Trump’s 25 per cent tariff, and any additional penalties, the GDP growth could fall to 6.1 per cent and even below the 6 per cent-mark, as per analysts.

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Trump’s tariff could slash GDP growth by 50-60 basis points, exports by 12.5%

The State Bank of India (SBI) has said that a 20 per cent tariff could slash as much as 50 basis points (0.5 per cent) from India’s GDP, according to CNBC-TV18.

At 25 per cent tariff, this would mean a cut of around 62 basis points, dragging down India’s GDP growth to around 5.87 per cent.

The SBI study further said that any 1 per cent rise in tariff may lead to a 0.5 per cent decline in export volumes”.

At 25 per cent tariff, this would mean 12.5 per cent decline in export volume. This could have massive implications for the Indian economy as the United States in India’s largest export destination.

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Other analysts said that the tariff’s effect could be in the range of 40-50 basis points.

ANZ economists Dhiraj Nim and Sanjay Mathur said if 25 per cent tariff remained in place for the remainder of 2025-26, “it could subtract 40 basis point from GDP growth”, according to The Indian Express.

Separately, Barclays has projected a hit of 30 basis points and Nomura has projected a hit of 20 basis points.

“Taking into account the sectoral exemptions, we estimate the effective tariff rate (for India) at ~20 per cent. The announced reciprocal tariff rate of 25 per cent, however, may be temporary, and might settle lower, as negotiations will continue after August 1. However, the best-case outcome would still be tariffs in the 15-20 per cent range, which is disappointing, considering India’s more advanced stage of negotiations,” noted Nomura, as per Financial Express.