US reciprocal tariffs may hit India’s exports by up to $7 billion in FY26: Ind-Ra

Ind-Ra on Friday said India’s exports to the US may decline by USD 2 billion to USD 7 billion in FY26 if the US implements the reciprocal tariffs it is contemplating.

India’s exports to the US rose by 5.57 per cent to USD 59.93 billion during April-December this fiscal. On the other hand, imports during the first nine months of 2024-25 grew by 1.91 per cent to USD 33.4 billion The US is the largest trading partner of India from 2021-22 and accounts for about 18 per cent of India’s total goods exports, over 6 per cent in imports and about 11 per cent in bilateral trade.

During 2021-24, America was the largest trading partner of India. The US is one of the few countries with which India has a trade surplus.

In 2023-24, the US was the largest trading partner of India with $119.71 billion bilateral trade in goods ( $77.51 billion worth of exports, $42.19 billion of imports and $35.31 billion trade surplus).

The increasing trade assumes significance as the two countries are aiming at $500 billion two-way commerce by 2030 and a trade agreement.

India Ratings and Research (Ind-Ra) estimates suggest that should reciprocal tariffs be imposed by the US, India’s exports to the US may decline anywhere between USD 2 billion and USD 7 billion in FY26.

”However, the weighted average tariff differential is around 7 percentage point (pp), and a more plausible scenario as per Ind-Ra is a decline in exports to the US by USD 2 billion-3.5 billion, leading to a decline in the GDP growth in the range of 5-10 bps from our current estimate of 6.6 per cent,” said Devendra Kumar Pant, Chief Economist and Head Public Finance, Ind-Ra.

Clarity will likely emerge in the next four to six weeks, following the discussions between the two governments. Therefore, the emerging geoeconomic situation is a key monitorable for the Indian economy.

Bilateral trade negotiations, defense and energy pacts between India and the US could minimise the adverse impact of reciprocal tariff for India, Ind-Ra said.

With inputs from agencies