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Official says Trump's 25% tariff could cut India's GDP by 0.2% — here's what analysts say
Even as the government has been guarded in its response to US President Donald Trump's tariffs, an official has sought to paint a rather optimistic picture and said that the impact could be limited to just 0.2 per cent of the GDP. However, independent analysts have projected a larger impact.
Trump on Thursday formally slapped 25 per cent tariff on India — the highest on a key strategic partner. He has threatened additional penalties over India's purchase of Russian oil and defence equipment.
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While the government has not gone into specifics, an official told India Today that the worst-case scenario could be a loss of 0.2 per cent to the GDP.
'There may be a marginal impact of the 25 per cent tariff, but this impact is not at all alarming on Indian markets. The worst-case scenario may lead to a GDP loss of less than 0.2 per cent, which is manageable,' the official said.
Based on the GDP data of 2024-25 and the Reserve Bank of India's (RBI) GDP growth projection for 2025-26, the revised GDP growth projection for the year would be 6.3 per cent. But independent analysts have said that Trump's tariffs could drive Indian GDP growth to below the 6 percent-mark this year.
ALSO READ: Trump's 25% tariff on India could drag down GDP growth by 50-60 basis points, say analysts
The official further said that the impact on Indian exports will be minimal and agriculture, dairy, and micro, small, and medium enterprises (MSMEs) sectors will remain protected. Notably, India has made it clear that it will keep agriculture and dairy out of any trade deal with the United States, but Trump has not agreed to the condition — and that is one of the main reasons why the two sides have not yet reached a trade deal.
What do independent analysts say about Trump's tariffs' impact?
In sharp contrast to the official quoted by NDTV, independent analysts have said that Trump's tariff could deliver a hit of 50-60 basis points to the Indian GDP growth, driving it below the 6 per cent-mark.
In an analysis published before the announcement of tariffs, the State Bank of India (SBI) had said that a 20 per cent tariff could slash as much as 50 basis points from India's GDP growth. 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.
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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.
ANZ economists Dhiraj Nim and Sanjay Mathur projected that 25 per cent tariff could cut 40 basis point from GDP growth, according to The Indian Express.
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There had been earlier indicators of change beginning with President Trump's acknowledgement of Pakistan's counter-terrorism assistance in his State of the Union Address in March 2025. The allocation of a significant financial package as assistance to Pakistan for maintaining its F16 aircraft despite an otherwise stringent foreign aid cutback, was another. Alongside, more even-handed references to the India-Pakistan dynamic, meetings and telephone conversations between the US secretary of State and senior Pakistan leaders further underlined this shift. The announcement of a US-Pakistan Trade Agreement, albeit with a 19% tariff on imports from Pakistan, and Trump's enthusiastic references to hydrocarbon exploration and investment, are but the latest in this trend. The trade agreement may not be the best deal Pakistan could have got, but it is not as bad as could have been, and in any case some deal was better than no deal as far as the government of Pakistan was concerned. 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