trump-tariffs-set-to-drag-down-us-gdp-by-up-to-50-bps

As Indian exporters brace for the impact of additional 25 per cent US tariffs on key goods that came into effect on Wednesday, a report has warned that Donald Trump’s tariff move could weigh on the American economy, with US GDP expected to decline by 40 to 50 basis points.

 

According to SBI Research, the tariffs are likely to trigger inflationary pressures and slow growth, keeping US inflation above the Federal Reserve’s 2 per cent target through 2026.

 

The report highlighted that supply-side effects of tariffs and currency movement are pushing up costs in import-sensitive sectors such as electronics, automobiles, and consumer durables.

 

“The US is beginning to show signs of renewed inflationary pressure, driven by the pass-through effects of recent tariffs and a weaker dollar,” the report noted. It added that US GDP could be affected by as much as 40 to 50 basis points, with higher input costs adding further strain.

 

The warning comes as the Federal Reserve struggles to balance rising prices with a fragile job market. Speaking at the Fed’s annual Jackson Hole conference, Chair Jerome Powell said the impact of higher tariffs on inflation is “now clearly visible.”

 

Also Read : India braces as Trump tariffs double to 50 pc today

 

US wholesale prices surged nearly 1 per cent in July, the steepest rise in more than three years.

 

The Producer Price Index climbed 3.3 per cent year-on-year, with sharp increases in services, processed goods, and tariff-heavy imports such as furniture and apparel. Economists cautioned that unless tariffs are rolled back, American households will face more financial pressure.

 

The new duties stem from a Department of Homeland Security draft notification that imposed an additional 25 per cent tariff on Indian goods beginning Wednesday (US time). The move, DHS said, was aimed at addressing “threats to the United States by the Government of the Russian Federation.”

 

The new levy comes on top of an earlier 25 per cent duty, though exemptions remain for certain categories, including electronics and pharmaceuticals.