India faces $14-billion export losses over US tariffs, NIPFP warns

New Delhi: India could incur direct export losses of about $14 billion, or 0.38% of GDP, owing to reciprocal tariffs imposed by US President Donald Trump, according to a presentation by the National Institute of Public Finance and Policy (NIPFP) on Friday. NIPFP, an autonomous research institute under the ministry of finance, raised concerns about import surges and dumping across various sectors, fuelled by the US-China decoupling. 

The presentation by NIPFP economists Rudrani Bhattacharya, Radhika Pandey and Manish Gupta highlighted that while Indian exports were likely to be affected by tariffs, a trade deal could mitigate some of the effects, though at the cost of sacrificing India's trade surplus with the US.

Also read: India open to revising EV manufacturing policy for foreign automakers post US tariff clarity

The presentation, titled ‘Impact of Trump Shock on Indian Economy - An Assessment’ cautioned that imports could surge as products were diverted from China, Vietnam and other countries, while rising recession and inflation risks in the US could dampen global growth, affecting India's growth prospects.

Indirect hit to services?

While goods exports face a direct hit, the services sector—key to India's overall export growth—could suffer due to stagflation in the US. Broad sectors such as electronics, gems and jewellery, machinery, textiles, metals, and transport equipment face heightened risk because of elevated tariffs, according to the presentation. Gems and jewellery are especially vulnerable as competing countries benefit from lower tariffs, potentially eroding India's market share, it noted.

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NIPFP said labour-intensive industries such as footwear, garments, rubber articles, furniture and toys had the potential to capitalise on opportunities from countries with higher tariffs than India. "For example, for footwear, the major exporters to the US are China and Vietnam, but they are subject to higher tariffs. India could gain some market share but needs to scale up its manufacturing," it added.

India's goods trade surplus with the US was $41.18 billion in FY25, 16.6% higher than the previous year's $35.32 billion. This growth was due to an 11.6% rise in exports to the US to $86.51 billion, while imports from the US grew 7.4% to $45.33 billion.

Dumping risk

Economists at NIPFP anticipate that the US-China decoupling could lead to dumping of key commodities such as resins, paper and rubber into India. "On account of Chinese retaliatory tariffs on the US, the dumping of agricultural products into India cannot be ruled out," they added in the presentation.

The economists suggested strategies to address trade imbalances and enhance India's global trade position, such as reducing the trade surplus with the US by boosting imports of oil and other products, accelerating trade negotiations, securing sector-specific exemptions, and diversifying exports to the EU, UK, and ASEAN.

Also read: Five Indian textile stocks that could gain from US tariffs in 2025

They also recommend strengthening domestic manufacturing through initiatives such as Make in India, focusing on semiconductors, renewable energy and electronics, while offering targeted concessions on select US goods, expanding production-linked incentive schemes for vulnerable sectors, and improving export infrastructure and logistics.

According to the presentation, India may either be able to grab trade diversification opportunities thrown up by differential tariffs, or the impact of US trade policies on global growth, including India, could be closer to the global financial crisis of 2008-09.

New Delhi: India could incur direct export losses of about $14 billion, or 0.38% of GDP, due to reciprocal tariffs imposed by US President Donald Trump, raising concerns about import surges and dumping across various sectors, fueled by the US-China decoupling, according to a presentation by the National Institute of Public Finance and Policy (NIPFP) on Friday.

The presentation by NIPFP economists Rudrani Bhattacharya, Radhika Pandey, and Manish Gupta highlighted that while Indian exports are likely to be impacted by tariffs, a trade deal could mitigate some of the effects, though coming at the cost of sacrificing India's trade surplus with the US.

The presentation titled 'Impact of Trump Shock on Indian Economy - An Assessment' cautioned that imports could surge as products are diverted from China, Vietnam, and other countries, while rising recession and inflation risks in the US could dampen global growth, affecting India's growth prospects.

Additionally, while goods exports face a direct hit, the services sector—key to India's overall export growth—could suffer due to US stagflation.

Broad sectors such as electronics, gems and jewellery, machinery, textiles, metals, and transport equipment face heightened risk due to elevated tariffs, according to the presentation.

Gems and jewellery, in particular, are vulnerable, as competing countries benefit from lower tariffs, potentially eroding India's market share, it noted.

The presentation highlighted the potential for labour-intensive industries like footwear, garments, rubber articles, furniture, and toys to capitalize on opportunities from countries with higher tariffs than India.

"For example, for footwear, the major exporters to the US are China and Vietnam but they are subject to higher tariffs. India could gain some market share but needs to scale up its manufacturing," it added.

India's goods trade surplus with the United States for FY25 reached $41.18 billion, a 16.6% increase from the previous year's $35.32 billion.

This growth was driven by an 11.6% rise in exports to the US, totaling $86.51 billion, while imports from the US grew 7.4% to $45.33 billion.

Economists at NIPFP anticipate that, due to the US-China decoupling, key commodities such as resins, paper, and rubber could face dumping into India.

"On account of Chinese retaliatory tariffs on the US, the dumping of agricultural products into India cannot be ruled out," they added in the presentation.

The NIPFP economists suggested strategies to address trade imbalances and enhance India's global trade position, including reducing the trade surplus with the US by boosting imports of oil and other products, accelerating trade negotiations, securing sector-specific exemptions, and diversifying exports to the EU, UK, and ASEAN.

They also recommend strengthening domestic manufacturing through initiatives like "Make in India," focusing on semiconductors, renewable energy, and electronics, while offering targeted concessions on select US goods, expanding PLI schemes for vulnerable sectors, and improving export infrastructure and logistics.

According to the presentation, India could either be able to grab trade diversification opportunities due to differential tariff advantages, in the aftermath of the reciprocal tariffs, or the impact of disruptions due to US policies on global growth, including India, could be closer to the global financial crisis (2008-09).

ENDS