Trump's tariff hike: Goldman Sachs says this on Indian economy

India's economy could be facing further strain as US President Donald Trump imposes an additional 25% duty on Indian imports, raising the total tariff to 50% by late August. This decision, tied to India's crude oil dealings with Russia, could lead to a 0.3 percentage point annualised reduction in real GDP growth, according to Goldman Sachs.

This comes on top of an existing 0.3 percentage point impact from a previous tariff round in April 2025. The new levy is expected to bring the effective average tariff rate on Indian exports to the US to approximately 32%, once exclusions under Section 232 of the US Trade Expansion Act are applied.

India exported $86.5 billion worth of goods to the United States in FY25, while importing $45.7 billion, with key exports including electronics, chemicals, pharmaceuticals, and textiles. The US' share of crude oil imports to India was 4%, rising to 8% in April and May 2025, yet remaining small compared to Russia's contribution.

The Ministry of External Affairs (MEA) has labelled the US action as "unfair, unjustified, and unreasonable." It stated, "It is extremely unfortunate that the US has chosen to penalise India for decisions being made by several other countries in their own national interest."

Analysts from Goldman Sachs noted that 4% of India's GDP is linked to final demand from the US, marking a significant economic exposure. The MEA emphasised that India's energy sourcing is driven by market pricing and supply security, suggesting that the tariffs might complicate bilateral trade relations further.

The imposition of these tariffs could introduce challenges in achieving projected economic growth targets, requiring careful navigation of the geopolitical landscape to mitigate potential impacts on trade and economic stability.