India’s Exports to US May Decline by $2-7 Billion in FY26 Post Reciprocal Tariff: Ind-Ra

India Ratings and Research (Ind-Ra) has projected that India’s exports to the US may decline by $2 billion to $7 billion in FY26 if the reciprocal tariffs being contemplated by the US are implemented. This comes amid ongoing discussions between the two governments regarding trade relations.

*Current Trade Scenario*

India’s exports to the US rose by 5.57% to $59.93 billion during April-December this fiscal year. On the other hand, imports during the first nine months of 2024-25 grew by 1.91% to $33.4 billion. The US has been India’s largest trading partner since 2021-22, accounting for about 18% of India’s total goods exports, over 6% in imports, and about 11% in bilateral trade.

*Impact of Reciprocal Tariffs*

Ind-Ra estimates that if reciprocal tariffs are imposed by the US, India’s exports to the US may decline anywhere between $2 billion and $7 billion in FY26. Devendra Kumar Pant, Chief Economist and Head Public Finance at Ind-Ra, stated, “The weighted average tariff differential is around 7 percentage points (pp), and a more plausible scenario as per Ind-Ra is a decline in exports to the US by $2 billion-3.5 billion, leading to a decline in the GDP growth in the range of 5-10 bps from our current estimate of 6.6%.”

*Future Outlook*

Clarity on the situation is expected to emerge in the next four to six weeks, following discussions between the two governments. The emerging geoeconomic situation is a key monitorable for the Indian economy. Bilateral trade negotiations, defense, and energy pacts between India and the US could help minimize the adverse impact of reciprocal tariffs for India.