US tariff hike may cost India $6 billion a year, but Neelkanth Mishra sees room for a deal

India could face an annual export hit of $6 billion after the US raised tariffs to 25% on a wide range of goods. But Neelkanth Mishra, Chief Economist at Axis Bank, believes this move is part of ongoing negotiations rather than a full-blown trade conflict.Indian exporters were already paying about $8 billion in tariffs after earlier hikes. The expectation was that the new rate would be around 15%, which would have raised the total burden to $12 billion. However, the 25% rate could now push it to $18 billion. Mishra estimates the additional impact at $6 billion based on last year’s export numbers, with sectors like electronics, jewellery and smartphones likely to be affected.

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Still, he said the broader relationship between the two countries remains strong, and these tariff moves should be seen in context. “The market should be best off just thinking about it as a $6 billion impact,” Mishra said, adding that India has room to counter some of the pressure through fiscal or regulatory measures.
Despite strong language from US President Donald Trump, Mishra said there’s no reason to see this as a breakdown in bilateral ties.Mishra does not see the slowdown in foreign fund flows into India as a disruption. While some investors may pause briefly, he believes flows are largely being driven by broader global factors such as interest rates and growth prospects.

“India is not an outlier,” he said, referring to data on fund flows over the past year. He noted that India’s share of global flows remained within a normal range, adding that countries like China had actually received more inflows, despite tensions with the US.

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Mishra believes markets would be better off focusing on domestic factors, especially the pace at which credit demand recovers. Credit growth has slowed over the past year, and according to him, that could weigh more heavily on the economy than the tariff news.

In his view, the tariff hike is more likely a pressure tactic ahead of negotiations. “This is like the semi-final, not the final,” he said, suggesting there could still be room for a middle ground.