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Imposing Tariffs Will Negatively Affect the US Economy More than India's: SBI Research

Written by: Team Angel OneUpdated on: 2 Aug 2025, 5:32 pm IST
SBI Research says Trump’s 25% tariff on Indian goods may hurt the US more, raising inflation and household costs, with limited long-term impact on India.
Imposing Tariffs Will Negatively Affect the US Economy More than India's: SBI Research
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The 25% tariff on Indian goods announced by Donald Trump is expected to impact the US economy more than India’s, according to a report released by SBI Research on August 1, 2025. The paper described the move as a “bad business decision” and highlighted its likely economic consequences for American consumers and markets.

Higher Costs for US Households

The report estimated that US households may bear an additional burden of around $2,400 in the short term due to rising prices. Lower-income families could face losses of approximately $1,300, while higher-income groups might see costs increase by up to $5,000. 

As per the report, these estimates are based on the ripple effects of import tariffs on consumer goods.

Pressure on the US Economy

SBI Research noted that the US is already witnessing renewed inflationary trends. These tariffs, along with a weakening dollar, may push inflation above the 2% target until at least 2026. The report also warned of potential negative effects on GDP and purchasing power in the US.

Impact on Indian Pharma Exports

India supplies nearly 47% of the US’s pharmaceutical imports. Around 40% of India’s pharma exports are directed to the US. If the tariffs remain in place, earnings of Indian pharmaceutical firms could decline by 2% to 8% by FY26. Many large Indian pharma companies derive 40-50% of their revenues from the US market.

Diversified Export Markets for India

While the US accounts for 20% of India’s exports, India’s overall export base is spread across various countries. The top 10 export destinations together account for only 53% of India’s exports, reducing its vulnerability to any one market.

Read more: Will IT Software Companies in India Feel the Heat of Trump’s Tariffs?

Rising Trade Surplus with the US

India’s trade surplus with the US has grown from $11 billion in FY13 to a projected $43 billion in FY25. In Q1 FY25 alone, the surplus stood at $12.7 billion, with exports to the US rising by 22.3% year-on-year, compared to an 11.7% rise in imports.

Conclusion

According to SBI Research, the broader economic cost of the tariffs may fall more heavily on the US economy, with inflationary pressure and higher household expenses being key concerns.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Aug 2, 2025, 12:02 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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