US President Trump upends bilateral, multilateral, and institutional trade architecture with sweeping tariff hikes
Download ReportQuantEco Research || US Reciprocal Tariffs: Assessing the first cut impact on India
The imposition of reciprocal tariffs provides a universal character to the trade disruption. The absence of any comparable historical template makes impact assessment a daunting task.
For India, the first cut assessment points towards a direct gross impact of USD 10-15 bn (2.2-3.3% of total exports and 0.2-0.3% of GDP). The net impact could however be somewhat lower as India’s key export competitors like China, Vietnam, and Bangladesh face relatively much higher tariffs. Having said, the uncertainty caused by reciprocal tariffs is also bound to have a dampening impact on overall global demand, which in turn would have an adverse spillover impact on India. Notwithstanding several moving parts (including the likelihood of India-US Bilateral Trade Agreement later in the year), we make the following adjustments to our key FY26 macro calls:
- GDP growth marked lower by 30 bps to 6.4%
- CPI inflation marked lower by 20 bps to 4.1%
- Current account gap marked lower by 50 bps to -0.8% of GDP | BoP surplus revised up to USD 10 bn from USD 3 bn
- For now, we expect the central government to adhere to the FY26 fiscal deficit target of 4.4% of GDP
- We revise lower our end Mar-25 10Y g-sec yield forecast to 6.20% from 6.40% earlier, while we maintain our USDINR forecast of 89.50 by Mar-25.