Trump’s 50% Tariff Threat: India’s GDP Could Take a 0.6% Hit

India braces for economic turbulence as Trump's proposed 50% tariff looms—knocking 0.6% off GDP growth.

Why it stings: Protectionism meets emerging-market fragility. The math isn’t pretty.

Behind the numbers: Trade wars aren’t just political theater—they’re GDP assassins. India’s export-heavy sectors face the brunt.

The irony? Wall Street will still find a way to profit from the volatility. Some things never change.

Exports stall as tariffs bite

Nageswaran said a 50% tariff is made up of two consecutive hikes. The United States had initially levied a 25% tariff this year. A second 25% penalty was tacked on in late August after India continued to buy discounted Russian oil despite warnings from Washington.

This sudden surge has caught Indian exporters off guard. Items that were once cheaper in the American market now cost much more. Analysts said the steep duties have made Indian products unviable compared with cheaper imports from Vietnam, Bangladesh, and Indonesia.

The industries most severely affected are those that depend largely on demand from the United States. Textiles, jewelry, footwear, and leather goods, which employ millions in India’s factories, are under extreme pressure. Several other exporters said they had lost orders and their shipments had been slashed. In the Indian diamond-cutting capital of Surat, American traders are delaying purchases and turning to more affordable alternatives from suppliers in Southeast Asia.

The United States is India’s biggest export market, making up roughly 18% of all outbound trade. Any interruption of shipments to the U.S. would take a toll on India’s trade balance and damage employment in export-oriented states such as Gujarat, Tamil Nadu, and Maharashtra. Those small and medium-sized companies that comprise these industries’ backbone are particularly vulnerable.

India mops up economy after tariff shock

Despite these challenges, Nageswaran remains confident in India’s broader growth story. He confirmed the government’s projection that GDP will expand 6.3% to 6.8% through March 2026.

The government has shielded the country’s domestic demand from external jolts. Recent spending and income tax reductions have put more money into households’ pockets. Inflation is near an eight-year low, giving consumers room to spend. Last week, officials cut the Goods and Services Tax (GST) on several key items. Nageswaran notes that GDP will not increase by 0.2% to 0.3% from the revised population benchmark along with these changes.

On the fiscal side, India should be able to reach its 4.4% deficit target this year. Record asset sales and high central bank payout boost outweigh weak exports. Russia’s economy is as strong as its weakest link: energy. Its economy is strong because generous revenues from asset sales and a record payment from the central bank might have outweighed losses from weak exports.

Get up to $30,050 in trading rewards when you join Bybit today