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Economic Impact 2

The 2025 tariff dispute between India and the U.S. has led to a 27% tariff on Indian goods, significantly impacting India's economy with projected export declines and reduced GDP growth. Key sectors affected include pharmaceuticals, automobiles, textiles, and chemicals, prompting India to explore diversification of export markets and negotiate trade agreements. The situation highlights the complexities of international trade relations as both nations navigate these challenges.

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18 views2 pages

Economic Impact 2

The 2025 tariff dispute between India and the U.S. has led to a 27% tariff on Indian goods, significantly impacting India's economy with projected export declines and reduced GDP growth. Key sectors affected include pharmaceuticals, automobiles, textiles, and chemicals, prompting India to explore diversification of export markets and negotiate trade agreements. The situation highlights the complexities of international trade relations as both nations navigate these challenges.

Uploaded by

mahak agarwal
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© © All Rights Reserved
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Title: Economic Impact of the 2025 India–USA Tariff Tussle

In 2025, trade relations between India and the United States have been
marked by significant developments, particularly concerning the imposition
of reciprocal tariffs. These tariffs, announced by President Donald Trump,
have had notable economic implications for both nations.

Background of the Tariff Dispute


The U.S. administration’s decision to impose a 27% tariff on Indian goods
was a response to India’s high import duties on American products. This
move aimed to equalize the tariff disparities between the two countries,
which had previously been a point of contention .

Impact on India’s Economy


The imposition of these tariffs has affected various sectors of the Indian
economy:
Exports: India’s exports to the U.S. are projected to decline by $2 to $7 billion
in the fiscal year 2025–26 due to the new tariffs .
GDP Growth: The Finance Secretary of India indicated that the tariffs could
reduce India’s GDP growth by 0.2 to 0.5 percentage points .
Business Sentiment: A Reuters poll revealed that India’s economic growth
outlook has dimmed, with GDP forecasted to grow at 6.3% in the current
fiscal year, a downgrade from 6.5% predicted earlier .

Sector-Specific Effects
Certain sectors have been more affected by the tariffs:
Pharmaceuticals: The U.S. is a significant market for Indian pharmaceutical
exports. The new tariffs have made Indian medicines less competitive,
potentially increasing healthcare costs in the U.S. .
Automobiles: India’s automotive sector faces challenges due to the tariffs,
although the impact is less severe compared to other industries .
Textiles and Chemicals: These sectors are also experiencing difficulties as a
result of the increased tariffs

Strategic Responses
In response to the tariff challenges, India is exploring several strategies:
Diversification of Export Markets: Indian exporters are looking to expand
their reach to other regions, such as Europe, Latin America, and Africa, to
mitigate the impact of reduced U.S. demand .
Trade Agreements: India is actively negotiating trade agreements with other
countries to strengthen its economic position and reduce dependence on the
U.S. market.
Domestic Reforms: The Indian government is focusing on improving
infrastructure and reducing domestic trade barriers to enhance
competitiveness.

Conclusion
The 2025 tariff dispute between India and the United States has had
significant economic repercussions. While India faces challenges in sectors
like pharmaceuticals, textiles, and chemicals, the country’s strategic
responses aim to mitigate these impacts and maintain economic stability. As
both nations continue to navigate these trade tensions, the evolving
situation underscores the complexities of international trade relations in the
modern global economy.

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