50 bps GDP hit coming? Former RBI guv warns of Trump tariffs and China dumping double blow
Subbarao also issued a stark warning about reputational damage after Donald Trump referred to India as becoming “dead like Russia.” “Even so, for India, being labelled a ‘dead’ economy by a U.S. president carries reputational costs,” he said
- Aug 13, 2025,
- Updated Aug 13, 2025 8:39 AM IST
Donald Trump’s proposed 50% tariff on Indian exports could slash GDP growth by up to 50 basis points and deepen India’s jobless growth crisis, former RBI Governor Duvvuri Subbarao has warned in an interview with The Indian Express. He also cautioned that retaliatory trade moves by China could further squeeze India’s manufacturing sector.
Subbarao said the tariff threat from the U.S. — especially targeting labour-intensive sectors like textiles, footwear, and gems — directly endangers exports worth nearly 2% of India’s GDP. “Margins will be eroded, orders diverted, jobs lost, and plants downsized,” he said, predicting a potential 20–50 bps hit to growth, depending on how well India absorbs or diverts the shock.
He added that the distributional impact would be regressive, worsening income inequality and placing additional pressure on India’s already fragile formal employment landscape.
Beyond the U.S., Subbarao flagged a second, growing risk: China’s industrial overcapacity. With Beijing facing its own tariff pressures from Washington, Chinese exporters may flood markets like India with cheap goods to offload excess inventory. “We must also reckon with China’s possibility of dumping in our markets to compensate for their own loss of U.S. market share,” he warned.
This twin squeeze — from both U.S. tariffs and Chinese dumping — could stall India’s manufacturing competitiveness just as it attempts to break into global value chains under the China+1 strategy.
Subbarao also issued a stark warning about reputational damage after Donald Trump referred to India as becoming “dead like Russia.” “Even so, for India, being labelled a ‘dead’ economy by a U.S. president carries reputational costs,” he said. “Such comments can raise India’s risk premium, dent investor sentiment, and prompt portfolio reallocation even without direct policy actions.”
He stressed that as global liquidity tightens and borrowing costs rise, India must shield vulnerable sectors and accelerate structural reforms to maintain investor confidence and macroeconomic stability.
Donald Trump’s proposed 50% tariff on Indian exports could slash GDP growth by up to 50 basis points and deepen India’s jobless growth crisis, former RBI Governor Duvvuri Subbarao has warned in an interview with The Indian Express. He also cautioned that retaliatory trade moves by China could further squeeze India’s manufacturing sector.
Subbarao said the tariff threat from the U.S. — especially targeting labour-intensive sectors like textiles, footwear, and gems — directly endangers exports worth nearly 2% of India’s GDP. “Margins will be eroded, orders diverted, jobs lost, and plants downsized,” he said, predicting a potential 20–50 bps hit to growth, depending on how well India absorbs or diverts the shock.
He added that the distributional impact would be regressive, worsening income inequality and placing additional pressure on India’s already fragile formal employment landscape.
Beyond the U.S., Subbarao flagged a second, growing risk: China’s industrial overcapacity. With Beijing facing its own tariff pressures from Washington, Chinese exporters may flood markets like India with cheap goods to offload excess inventory. “We must also reckon with China’s possibility of dumping in our markets to compensate for their own loss of U.S. market share,” he warned.
This twin squeeze — from both U.S. tariffs and Chinese dumping — could stall India’s manufacturing competitiveness just as it attempts to break into global value chains under the China+1 strategy.
Subbarao also issued a stark warning about reputational damage after Donald Trump referred to India as becoming “dead like Russia.” “Even so, for India, being labelled a ‘dead’ economy by a U.S. president carries reputational costs,” he said. “Such comments can raise India’s risk premium, dent investor sentiment, and prompt portfolio reallocation even without direct policy actions.”
He stressed that as global liquidity tightens and borrowing costs rise, India must shield vulnerable sectors and accelerate structural reforms to maintain investor confidence and macroeconomic stability.