Indian exporters are bracing for impact after the United States slapped an additional 25 per cent tariff on key Indian goods on August 27, a move that many say will hurt not just India but also the American economy. According to a report by SBI Research, the so-called “Trump tariffs” are likely to shave off 40-50 basis points from the US GDP, while pushing inflation beyond manageable levels.
The report highlighted that the US inflation rate is expected to stay above the Federal Reserve’s 2 per cent target through 2026, driven largely by supply-side disruptions, weaker dollar movements, and tariff-induced price hikes.
“The US is beginning to show signs of renewed inflationary pressure, driven by the pass-through effects of recent tariffs and a weaker dollar, particularly in import-sensitive sectors such as electronics, autos, and consumer durables,” the SBI Research note cautioned.
Trump’s protectionism hurting Americans
While the tariffs are officially being imposed by the Department of Homeland Security (DHS) under the Biden administration, economists point out that it is the legacy of Trump’s aggressive tariff regime that has created a climate of protectionism. The report warned that these policies are now boomeranging on the American economy, burdening families with higher costs of living.
At the Federal Reserve’s annual Jackson Hole conference, Fed Chair Jerome Powell admitted that the effects of tariffs are “now clearly visible” on prices. He added that balancing inflation with job market fragility will remain a daunting task.
Inflation spikes across sectors
US wholesale prices recorded the sharpest monthly increase in more than three years, jumping nearly 1 per cent in July. The Producer Price Index (PPI) rose 3.3 per cent year-on-year, with the steepest price hikes in tariff-sensitive imports like furniture, apparel, processed goods, and services.
“Unless tariffs are rolled back, US families will face deeper strain on household budgets,” economists warned, pointing to the direct pass-through of tariffs to retail prices.
India in the crosshairs of US tariffs
The DHS draft notification revealed that the latest 25 per cent tariff hike was linked to alleged “threats to the United States by the Government of the Russian Federation,” a reasoning that Indian trade experts have termed misplaced and politically motivated.
This new levy is in addition to the earlier 25 per cent tariffs, though exemptions remain in place for a few sensitive sectors such as electronics and pharmaceuticals.
As Washington doubles down on tariffs, Trump’s failed protectionist experiments are continuing to haunt the US economy, fanning inflation and hurting growth prospects. For Indian exporters, the shock of a double tariff hit will weigh heavily on trade volumes, but the bigger loser may ultimately be the American consumer, who now faces higher costs at the checkout counter.
