India’s Trade Resilience to Offset US Reciprocal Tariffs: SBI Research

According to SBI Research, the US government’s plan to impose reciprocal tariffs is expected to have only a small impact on India, with exports likely to decline by just 3-3.5%. However, this effect could be offset by India’s efforts to boost exports in manufacturing and services. The country is focusing on increasing value-added exports, expanding trade routes, and strengthening supply chains that connect Europe, the US, and the Middle East.

India’s Position in Aluminium and Steel Trade

India may also benefit from the recent US tariffs on aluminium and steel. Although India has a small trade deficit with the US in these sectors—$13 million in aluminium and $406 million in steel—its role in the US aluminium market remains notable. While India’s share in US aluminium imports has slightly dropped from 3% to 2.8% between 2018 and 2024, it still ranks among the top 10 aluminium suppliers to the US. However, in steel, India accounts for only 1% of total US imports and is not among the top 10 suppliers.

Impact on India’s Free Trade Agreements (FTAs)

US trade policies are influencing India’s approach to free trade agreements (FTAs). India is actively negotiating FTAs with the UK, Canada, and the European Union, focusing on services, digital trade, and sustainable development. The FTA with the UK alone is expected to boost bilateral trade by $15 billion by 2030. Additionally, digital trade is expected to play a major role in India’s economic growth, potentially contributing $1 trillion to GDP by 2025.

Concerns About the US Economy

SBI Research also highlighted potential economic challenges in the US. Historical data suggests that the US economy could face a slowdown, with declining GDP growth, reduced exports, and weaker consumer spending. The study also pointed out a downward trend in total factor productivity (TFP) growth, rising labour costs that could discourage investment, and a sharp decline in national savings—reaching its lowest level since 2011 and the second-lowest since 1951.

Overall, while the US tariffs may have some impact, India’s strong trade strategies and economic policies are expected to minimise the risks and create new opportunities.

Conclusion

While US tariffs pose some challenges, India’s proactive trade strategies, focus on value-added exports, and expanding FTAs are expected to counterbalance the impact and drive long-term growth.

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