A new report from the State Bank of India (SBI) Research Department suggests that US trade tariff reciprocity might be more noise than substance, providing India with unexpected collateral benefits. The report, titled “Collateral Benefits: IND-US Trade Set to Transcend New Boundaries,” highlights the potential positive outcomes of bilateral negotiations across various sectors, including defense, energy security, innovations, technology, critical minerals, maritime security, investments, and higher education.
Describing India as the largest and most vibrant democracy, the report emphasizes India’s strategic and economic alignment with the US in the Indian Ocean region. According to SBI estimates, even if the US imposes incremental tariff levels of 15% to 20%, the impact on India’s exports to the US would be limited to a range of 3% to 3.5%, a setback that could be countered with higher export goals.
The report notes that India has diversified its export portfolio, added value, explored alternative areas, and developed new routes that span from Europe to the US via the Middle East, fostering strategic inclusivity in supply chains.
Over the years, both India and the US have adjusted their tariff structures to reflect evolving trade policies and economic priorities. While US tariffs on Indian exports have remained relatively stable, India’s tariffs on US imports have shown more dynamic changes. From 2018 to 2022, US tariffs on Indian goods increased from 2.72% to 3.83%, while India’s tariffs on US imports rose from 11.59% to 15.30%.
As the US remains India’s top export destination, accounting for 17.7% of total exports in FY24, the SBI report projects a potential fall in Indian exports should the US impose a retaliatory tariff of 15%, three times the current aggregate rate. The analysis captures the sensitivity of Indian exports to tariff fluctuations.
Looking ahead, both nations plan to sign a new ten-year ‘Framework for the US-India Major Defense Partnership in the 21st Century’ this year. The countries aim to more than double their total bilateral trade to $500 billion by 2030.
