Key Points
Trump announces 26% tariffs targeting multiple Indian export sectors
Experts warn of significant economic impact on Indian businesses
Exporters expected to face immediate and severe challenges
Market likely to shift towards safer investment assets
US President Donald Trump has announced a 26 per cent tariff on Indian imports. The decision, which was revealed on Thursday morning IST, involves Trump announcing reciprocal tariffs on many countries, including India.
Ajay Bagga, a banking and international stocks expert told ANI that these tariffs are based on exaggerated calculations, which include actual customs duties, alleged currency manipulation, and GST. He described the shift in US trade policy as moving from "America First" to "America Alone."
He said, "Indian domestic sectors are protected from first-level effects, but Indian textiles, engineering goods, electronics, and gems & jewellery exporters are immediately impacted. Metals are seeing a sell-off this morning, along with oil. Pharma majors are in wait-and-watch mode as sectoral tariffs will be levied on these."
Bagga noted that while India's domestic sectors might not feel the immediate impact, exporters will bear the brunt of the increased costs.
The sudden tariff imposition is expected to impact India's economy in multiple ways. The higher duties could lead to a decline in Indian exports, eroding margins for exporters.
Additionally, investors are likely to shift funds to safer assets such as gold, the Japanese yen, the Swiss franc, and Japanese government bonds. Emerging market portfolio flows could also be affected as a result.
Bagga highlighted that the stock market's initial reaction to the news was to rush towards safe-haven assets while offloading riskier ones. He warned that the certainty of economic pain could weigh heavily on markets in the coming days.
He said, "Uncertainty is now converted to a certainty of economic and market pain. The first reaction is to rush into safe havens and to sell risk assets."
The new tariffs could pose a significant challenge for Indian exporters, who now have to navigate increased costs and reduced competitiveness in the US market. With further economic implications expected, stakeholders across industries will be closely monitoring the situation.
