On April 2, 2025, US President Donald Trump announced tariffs on more than 180 countries, including India, as part of his trade policy. India faces a 27% tariff on exports to the US, which is its largest export market. Global financial markets, including India, have reacted sharply to this. Indian stock markets, tracked by indices such as Nifty 50 and BSE Sensex, immediately fell as investors grappled with the implications of this trade shock.
Why Did Trump Impose Tariffs on India?
Trump’s reciprocal tariffs aim to address perceived trade imbalances, with the US claiming that India imposes significantly higher duties—averaging 17%—on American goods compared to the 3.3% levied by the US on Indian imports. The White House highlighted India’s “burdensome” import requirements and high tariffs as justification for the 27% levy, which took effect on April 2, 2025. This move has sparked concerns about disrupted supply chains, increased costs, and reduced competitiveness for Indian exporters, prompting a closer look at the sectors and stocks most vulnerable to this policy shift.
Indian Sectors Affected by US Tariffs
The US is a critical market for India, accounting for 18% of its total exports (approximately $77.5 billion in FY24). The new tariffs threaten several key industries, with varying degrees of exposure. Below are the primary sectors impacted and the potential consequences:
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Electronics and Technology Hardware
Impact: India exported $11.1 billion worth of electronics to the US in FY24, including iPhones assembled by companies like Dixon Technologies. The 27% tariff could make these products pricier for US consumers, potentially reducing demand and disrupting India’s growing role as a manufacturing hub.
Stocks to Watch:
Dixon Technologies: A key player in electronics manufacturing, Dixon may face margin pressure if US demand weakens.
Tata Consultancy Services (TCS): While IT services aren’t directly tariffed, broader trade tensions could affect US outsourcing contracts.
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Gems and Jewellery
Impact: With $9 billion in exports to the US, this sector faces significant risk. The US accounts for 30% of India’s jewellery exports, and a 27% tariff could erode competitiveness against rivals like Vietnam or Bangladesh.
Stocks to Watch:
Titan Company: A leading jewellery and watchmaker, Titan could see its US export revenue decline.
Rajesh Exports: Another major exporter, this stock may experience volatility as tariffs bite.
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Pharmaceuticals
Impact: India is the largest supplier of generic drugs to the US, with $9 billion in exports last year. While pharmaceuticals are currently exempt from the 27% tariff, any future inclusion could raise drug prices in the US, potentially reducing demand for Indian generics.
Stocks to Watch:
Dr. Reddy’s Laboratories: With 48% of its revenue from the US, this stock could face uncertainty if exemptions are lifted.
>Sun Pharmaceutical Industries: Another pharma giant reliant on the US market, Sun may see short-term gains from the exemption but remains at risk.
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Textiles and Apparel
Impact: India exported $9.6 billion in textiles and apparel to the US in FY24, representing 28% of its total exports in this category. The tariff could make Indian garments less competitive, especially in price-sensitive segments like cotton and carpets.
Stocks to Watch:
Welspun India: A major textile exporter, Welspun could see reduced US orders.
Trident: This textile firm may face profitability challenges as costs rise.
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Automotive and Auto Components
Impact: While India’s car exports to the US are minimal, auto parts worth billions are shipped annually. A separate 25% tariff on automobiles and parts (effective April 2 for cars and May 3 for parts) compounds the 27% reciprocal tariff, threatening supply chains for US automakers.
Stocks to Watch:
Tata Motors: Parent of Jaguar Land Rover, Tata Motors saw a 5% stock drop post-announcement due to its US exposure.
Bharat Forge: With 44% of its revenue from the US, this auto component maker is highly vulnerable.
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IT Services
Impact: India’s $50 billion IT services industry, dominated by firms like TCS, Infosys, and Wipro, derives over 50% of its revenue from the US. Although services aren’t directly subject to tariffs, restrictive US policies could increase costs and limit growth.
Stocks to Watch:
Infosys: A bellwether for the IT sector, Infosys fell 2.5% as the Nifty IT index slumped.
Wipro: Another IT giant, Wipro could face pressure from reduced US outsourcing budgets.
Conclusion: Navigating the Tariff Storm
India’s export-driven sectors will face a major challenge from US tariffs, with electronics, gems, textiles, auto components and IT services likely to be the most affected. Stocks like Dixon Technologies, Titan, Tata Motors, Infosys and Welspun India need to be watched as trade tensions escalate. However, India’s strong domestic market and strategic trade talks that could potentially lead to tariff cuts on US imports worth $23 billion could cushion the blow. Investors should remain cautious, balancing risks in export-heavy stocks with opportunities in domestically focused firms.
