India faces $8 billion in added export costs if US tariff talks fail: Johns Hopkins economist

The upcoming July 9 tariff deadline is creating serious uncertainty for India and the global economy. Pravin Krishna, Professor of International Economics at Johns Hopkins University, explained that if negotiations fail, tariffs on Indian exports to the US could rise from around 5-7% to nearly 26%.

He said, “There’s an extraordinary amount of uncertainty at the moment.” This sharp tariff increase would impact roughly $85 billion worth of Indian exports, leading to an estimated $16 billion in additional costs. While US importers are likely to bear part of this, Indian exporters could still face around $8 billion in added costs, which is significant but not devastating for India’s economy.

Professor Krishna also stated that these tariffs could fuel inflation in the US, especially since earlier announcements were not followed by actual imposition, allowing prices to stay stable for now. If tariffs kick in by July, the impact could show up later in the summer, justifying why the Federal Reserve remains cautious on cutting interest rates. Adding to the pressure is a weakening US dollar, largely driven by concerns over rising budget deficits and fears that the US may have to rely more on debt financing, which is pushing investors away from US treasuries.
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On whether India can benefit from the trade tensions with China, Professor Krishna strikes a cautious tone. While the tariff gap could make India look attractive for companies moving out of China, he said, “The chaos is so great at the moment… investors would probably wait a little bit” before making big moves, especially in industries requiring heavy investments. Despite the global turmoil, stock markets remain surprisingly stable, buoyed by hopes that fiscal policies like Trump’s proposed big spending bill could support US corporate in the short term.

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As for India’s outlook, Professor Krishna believes the medium-term prospects are strong, thanks to a mix of interest rate cuts, tax rebates, and infrastructure growth. But for the immediate term, he said it’s harder to predict due to the many global uncertainties ranging from oil prices to geopolitical risks. He sums it up by saying, “I feel reasonably good about the Indian economy, but I feel more strongly optimistic about the medium run than what’s going to happen in the coming few months.”

For the entire interview, watch the accompanying video

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