CEA flags Trump’s tariff fallout, says it may shave 0.5% off GDP

Chief Economic Adviser V Anantha Nageswaran on Monday warned that the 50 per cent tariffs imposed by US President Donald Trump on Indian goods could reduce the country’s GDP by 0.5 per cent to 0.6 per cent this fiscal year.

Nageswaran flagged the potential fallout, noting that if the tariffs persist, the impact could spill over into the next fiscal year, posing a significant risk to India’s growth trajectory.

“I hope the additional penal tariff is a short-lived phenomenon,” he said in a TV interview. “Depending on how long it lasts even in this financial year, it may translate into a GDP impact of somewhere between 0.5 per cent and 0.6 per cent,” he added.

Hope it ends soon

I hope the additional penal tariff is a short-lived phenomenon. If it persists, the impact may spill over to the next fiscal, posing a significant risk to India's growth trajectory.

V Anantha Nageswaran, CEA

The duties — doubled last month — cover 45-50 per cent of India’s $86.5 billion merchandise exports to the US, hitting labour-intensive sectors such as textiles, jewellery and seafood.

Washington cited India’s “unfair trade practices” and continued imports of Russian oil, which Trump argues fund Moscow’s war effort in Ukraine, as reasons for the hike. Finance Minister Nirmala Sitharaman defended India’s position, stressing that as the world’s third-largest oil consumer, it would continue buying Russian crude for its cost advantage. India exported goods worth $86.5 billion to the US last year and recorded a trade surplus of over $40 billion, government data show.

Despite the tariff shock, Nageswaran retained India’s growth forecast of 6.3-6.8 per cent for FY26, underpinned by a strong 7.8 per cent GDP expansion in the April-June quarter. Still, the tariffs threaten India’s competitiveness, potentially diverting business to rivals such as Vietnam, Bangladesh and China. The government is weighing support measures, including subsidies and market diversification, to soften the blow.