SBI Research Terms Donald Trump's Tariffs As 'Bad Business Decision', Predict Boomerang Effect On US

According to SBI Research, Trump's new 25 per cent tariffs on imports from India could end up hurting American consumers the most in what can be described as a boomerang effect.

What Does The SBI Research Report Say?

SBI Research in its latest report has said that the United States has made a "bad business move" by announcing this decision of imposing 25% tariff on Indian exports, adding that India's economy is better positioned than the US and can absorb the blow while sustaining the fallout.

"Tariffs act as a supply shock, pushing up intermediate goods costs and broadening into consumer prices as they pass through the value chain," the report said.

While the total US imports from the rest of the world stood at approximately $3,266 billion, the newly announced average tariff rate is assumed to be 20% across all imports. Thus, the tariff shock applies to nearly the entire volume, the report added.

The bank also suggested that in the absence of supply chain re-optimization or domestic substitution, the tariffs could push U.S.
inflation up by 2.0%. In the long run, when economic actors have had time to adjust to the new trade regime, the tariffs are expected to add 1.2% to baseline inflation, the report added.

Household Cost To Rise In US

According to the report, US tariffs are projected to cost the average U.S. household about $2,400 in the short term, mainly due to higher prices from tariff-driven inflation.

Additionally, low-income families may lose around $1,300 nearly triple the relative burden compared to high earners while high-income households could face losses of up to $5,000, though with less impact on their overall financial stability.

Further, the tariffs on US imports will affect the US GDP by 40-50 basis points (bps) and the input cost inflation will also be higher.

The report also noted that the US consumer prices could rise by 2.4% in the short term and 1.2% over the longer run due to tariffs, which affects almost all imports.

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