US effective tariff rate on Indian goods rises to 20.7%, up from 2.4% in 2024; escalating trade tensions cast shadow on growth outlook: Fitch report
Fitch reported, quoted by ET, noted that the overall US effective tariff rate stands at 17 per cent- about 8 percentage points lower than the estimate made on April 3 when reciprocal tariffs were initially declared.
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It explained, 'The US tariff rate of 17 per cent reflects a 15 per cent tariff rate on EU goods, including auto and auto parts, and higher tariffs for major trading partners Brazil, Taiwan, India and Switzerland.'
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The revised numbers come days after US President
formally announced a 25 per cent tariff on Indian goods, alongside a separate, undefined "penalty" linked to India's ongoing energy trade with Russia.
As the trade environment becomes increasingly uncertain, economists are trimming their growth expectations for India. Goldman Sachs has cut its growth projection for 2025 to 6.5 per cent and for 2026 to 6.4 per cent, citing the tariff surge as a key driver of the revision. 'In our view, some of these tariffs are likely to be negotiated lower over time, and further downside risk to the growth trajectory mainly emanates from the uncertainty,' the investment bank said.
, in its own analysis, estimated that the new US tariffs could reduce India's
by 20 to 25 basis points.
Christian de Guzman, senior vice president at Moody's Ratings, said the long-term effects could weigh on India's ambitions to become a major manufacturing hub. 'Curtailed access to the largest economy globally diminishes prospects for India's ambitions to develop its manufacturing sector, particularly in higher value-added sectors such as electronics,' he said, as quoted by ET.
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Despite the rising headwinds, Moody's maintains a relatively positive outlook on India's broader economic stability. 'India's economy is expected to remain resilient as it is less trade-reliant than other large economies in the Asia-Pacific,' de Guzman added.
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