President Donald Trump’s decision to impose a 26% tariff on Indian imports has sent shockwaves through Dalal Street, with key sectors bracing for significant challenges. The automobile industry and manufacturing are expected to be among the hardest hit, while IT and services remain relatively unaffected. Pharmaceuticals, a sector with significant exposure to the US market, have been temporarily exempt from the new tariffs.
However, the long-term outlook remains uncertain, leaving room for future volatility. The automobile sector, which relies heavily on exports to the US, is likely to face increased costs and potential revenue declines due to the imposed tariffs. Manufacturing and general export industries are also preparing for a rough period, as the additional tariffs will raise costs and make Indian goods less competitive in the US market.
On the other hand, the IT and services sectors have shown resilience in the face of the tariff hikes. These industries are expected to navigate the tariffs without significant disruption due to their limited reliance on physical exports.
Tariffs impact key Indian sectors
Economists and analysts predict a potential slowing of GDP growth as a result of the new tariffs. Global brokerages have begun to analyze the full repercussions for the Indian economy and its key industries, offering strategic recommendations to mitigate these challenges. Despite the turbulent session following the announcement of the US tariffs, relatively lower duties helped limit overall losses in Indian shares.
The IT sector, however, logged its steepest single-session decline in two years due to rising US macroeconomic concerns. India’s generic drugmakers saw a rise following the US tariff reprieve for pharmaceutical products, providing a partial buffer against the broader market downslide. Exporters expressed both disappointment and relief, with Ajay Sahai, director-general of the Federation of Indian Export Organisations, stating that while the tariffs are high and will hurt demand for exports, India faces lower levies compared to regional competitors like China, Indonesia, and Vietnam.
This situation opens up opportunities for India to gain market share, but if more countries retaliate and global trade is hurt, it could be detrimental to all parties involved. Experts suggest that India’s future policy responses should consider China’s next steps, as its excess industrial capacity and dumping in world and Asian markets could impact India. The Global Trade Research Initiative, a New Delhi-based think tank, believes that the tariff shakeup presents an opportunity for India to strengthen its position in global trade and manufacturing, particularly in sectors like textiles and garments, where high tariffs have been imposed on Chinese and Bangladeshi rivals.
