US import duties could rise 7-8% under reciprocal tariffs: S&P economist

The US is likely to impose reciprocal tariffs, which could raise import duties by about 7-8%, according to Satyam Panday, Chief US and Canada Economist at S&P Global Ratings.

Currently, the US imposes an effective tariff rate of 2.3% on global imports.

However, Panday noted that the global economic impact would be smaller compared to the universal 10-20% tariff Trump had proposed during his election campaign.

The focus will be on countries where both the trade deficit and tariff differential with the US are higher. “A lot of the emerging markets, Southeast Asia, and India… they all do have a higher tariff differential versus the US,” he said.

With India among the countries with the highest tariff gap with the US, the upcoming meeting between Prime Minister Narendra Modi and US President Donald Trump today (February 13) gains significance.

During his two-day visit, Modi is expected to discuss trade and strategic issues, including narrowing the trade deficit, reducing import tariffs, strengthening defence ties, and expanding energy cooperation. The talks could offer more clarity on how these proposed tariffs might impact India and its trade relations with the US.

Also Read: Modi-Trump meeting: Indian PM begins two-day US visit

Panday expects the tariff hike to create a one-time inflation bump in the US, but its long-term impact will depend on whether trading partners retaliate.

However, he cautioned that assuming no retaliation is a “pretty strong assumption to make.”

Also Read | US Fed meeting a non-event: Citi’s Drew Pettit on what’s next for global markets

Panday pegs US inflation at around 3%, attributing it to a strong economy, tariffs, labour shortages from immigration restrictions, and the extension of 2017 tax cuts—all of which contribute to an inflationary environment above the Federal Reserve’s 2% target.

The likelihood of further rate cuts in 2025 has also diminished. “If the tariffs do go through the way that he’s been promising through the year, it is going to be three percentage or more inflation by the end of this year. So that means the Fed will have to wait it out. They may not have a chance to cut again for this year,” Panday explained.

For the entire interview, watch the accompanying video

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