Trump tariffs: US President hits India with 26% reciprocal tariff—how might it affect the Indian inventory market?

Trump tariffs: US President Donald Trump introduced sweeping reciprocal tariffs on the buying and selling companions of the world’s largest financial system on April 2.

Trump’s ‘Liberation Day’ bulletins had no country-specific exclusions as he introduced new tariff charges for greater than 180 international locations. Aside from country-specific tariffs, Trump additionally introduced the imposition of a ten per cent baseline tariff.

Observe Donald Trump Tariff Announcement Reside Up to date Right here

Nonetheless, he imposed reciprocal tariffs at solely half the speed different international locations cost on US merchandise. Nonetheless, this was sufficient to unsettle the market, as Dow Jones Futures tumbled greater than 1.5 per cent after the tariff announcement.

He introduced a 26 per cent reciprocal tariff on India—half the speed India imposes on US imports. Moreover, Trump introduced a 25 per cent tariff on vehicle imports to the nation, which is prone to affect auto shares equivalent to Tata Motors and Samvardhana Motherson.

How might Trump tariffs affect the Indian inventory market?

Trump’s tariffs might set off a right away adverse response, as mirrored in Reward Nifty’s 1.5 per cent drop.

Sectors like IT and vehicles could face promoting stress, however within the medium to long run, the market is prone to soak up the affect.

Nonetheless, specialists level out that Trump’s tariff could not have a big adverse affect on the financial system, which is a comforting issue for the home market.

India’s commerce surplus with the US shouldn’t be vital. In keeping with India Model Fairness Basis (IBEF), in FY24, India had a commerce surplus of $36.8 billion with the US. Indian exports to the US stood at $77.5 billion, whereas American exports to India stood at $40.7 billion in FY24.

In keeping with specialists, India’s exports in essentially the most susceptible sectors quantity to only one.1 per cent of India’s GDP.

Some specialists spotlight that Trump introduced reciprocal tariffs at solely half the speed that different international locations impose on US merchandise. This has left room for negotiation quite than retaliation.

“The tariff of 26 per cent on India shouldn’t be extreme in comparison with tariffs on different international locations like China, Taiwan, Sri Lanka and Bangladesh. The market is prone to reply negatively. With a attainable bilateral commerce settlement between India and the US, tariffs are prone to come down,” stated VK Vijayakumar, Chief Funding Strategist at Geojit Investments Restricted.

In keeping with Narinder Wadhwa, Managing Director & CEO of SKI Capital Companies, the Indian inventory market usually reacts negatively to protectionist US insurance policies, as they improve international danger aversion. FPIs might scale back publicity to rising markets, resulting in volatility.

Furthermore, risk-off sentiment might weaken the rupee, affecting imported inflation and corporations with international debt.

Main sectoral affect

Trump’s tariffs couldn’t affect Indian companies normally however the sectors with excessive publicity to the US markets.

In keeping with brokerage agency Motilal Oswal, India’s high exported gadgets to the US are electronics (15.6 per cent of whole exports to the US), gems and jewellery (11.5 per cent), pharma merchandise (11 per cent), equipment for nuclear reactors (8.1 per cent) and refined petroleum merchandise (5.5 per cent).

“Whereas the reciprocal tariffs launched by Trump is seen with some dismay by India Inc., the affect stays extra sectoral than common for Indian companies,” stated Amit Sarkar, Accomplice, Bhuta Shah and Co LLP.

“Greater import tariffs would stay impacted on US-centric companies equivalent to pharma, iron and metal, electronics {hardware}, and auto elements,” stated Sarkar.

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Disclaimer: This story is for academic functions solely. The views and proposals above are these of particular person analysts or broking firms, not Mint. We advise traders to examine with licensed specialists earlier than making any funding choices, as market situations can change quickly, and circumstances could range.