‘Don't think US tariffs will…’: S&P confident Donald Trump’s tariffs won’t impact India’s growth; here’s why

The Donald Trump administration’s move to impose a total of 50% tariffs (25% base tariff + 25% additional tariff for India’s crude oil trade with Russia) is unlikely to have any significant impact on the Indian economy and its growth story, believes S&P Global Ratings. In fact, S&P has even said that the US tariffs pose no threat to the positive sovereign outlook for India.

S&P had enhanced its outlook on India's 'BBB-' sovereign rating to positive in May 2022, attributing it to strong economic performance.



Trump declared on August 6 that all Indian imports would face an additional 25% tariff, supplementing the existing 25% duty, resulting in a total tariff of 50% effective from August 27.

The White House attributed this decision to India's ongoing procurement of Russian oil.

Also Read | 'Can’t cross some red lines': Government officials tell Parliamentary Panel on India-US trade talks; focus on export diversification amidst Trump tariffs

Why US tariffs are unlikely to hit India’s growth story

The S&P Global Ratings Director YeeFarn Phua said on Wednesday that India's growth would remain unaffected by Trump's tariffs, given its limited trade-oriented economic structure, whilst maintaining a positive sovereign ratings outlook.

According to a PTI report, when questioned about potential risks to India's positive outlook due to US tariffs, YeeFarn explained that India's economy would remain stable, noting that its export exposure to the US represents merely 2% of GDP, indicating minimal trade dependence.

"I don't think the tariffs imposed on India will have an impact in terms of economic growth, largely because India is not a very trade-oriented economy. And if you look at India's exposure to the US in terms of exports to GDP, it is just about 2%,” YeeFarn Phua was quoted as saying.

S&P projects India's GDP growth to remain steady at 6.5% in the ongoing fiscal year, matching the previous financial year's performance.

YeeFarn noted that significant export sectors to the US, including pharmaceuticals and consumer electronics, remain unaffected by Trump’s tariff moves.

Also Read | Donald Trump tariffs: How much will India’s fuel bill rise if it stops Russian crude oil imports & where would it buy from? Explained

"Over the longer term, we don't think this (higher tariffs) will be a big hit (on India's economy), and therefore, the positive outlook on India remains," YeeFarn said at a Webinar on Asia-Pacific Sovereign Ratings.

Addressing concerns about US tariffs affecting investment flows into India, he explained that businesses have implemented the 'China plus one' strategy in recent years, establishing operations in India primarily to serve the local market.

"Many (businesses) are going there not because they are looking to export just to the US. Many of them are going there because of the huge domestic market as well. An emerging middle class is getting larger...So, even for those who are looking to invest more in India and looking to export, it might not necessarily be the US market," YeeFarn said.

India-US trade facts

In 2021-25, the United States emerged as India's leading trading partner. The US contributed approximately 18% to India's overall goods exports, whilst accounting for 6.22% of imports and 10.73% of bilateral trade.

India maintained a favourable trade balance with the United States, recording a surplus of $35.32 billion in goods during 2023-24. This figure increased to $41 billion in 2024-25.

The bilateral trade between India and the United States totalled $186 billion in 2024-25. During this period, India's exports to the US amounted to $86.5 billion, whilst imports were valued at $45.3 billion.

The ongoing trade negotiations between India and the US have hit a bump over the former’s clear stance of not opening its agricultural and dairy sectors to American products. Additionally, Trump’s desire to end the Russia-Ukraine conflict has led to India feeling the heat of 25% additional tariffs for its crude oil imports as a pressure tactic on Russian President Vladimir Putin.

Also Read | Donald Trump’s 50% tariffs on India spark outrage: Calls for boycotting US-based brands grow on social media; self-reliance in focus

Stay informed with the latest business news, updates on bank holidays, public holidays, current gold rate and silver price.