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The announcement of increased tariffs by US President Donald Trump has sent ripples of concern through India's corporate landscape. This policy shift is poised to impact a wide range of industries, from the IT sector, represented by giants like TCS and Infosys, to automobile manufacturers like Tata Motors, and pharmaceutical companies such as Sun Pharma and Cipla. These companies, among others, are now bracing for the potential consequences of the reciprocal tariff policy, which could significantly alter their competitive standing in the global market. Beyond these prominent sectors, the ripple effect extends to basic material industries like National Aluminium and Tata Steel, highlighting the widespread implications of the US trade policy. The immediate response to the announcement was visible in the stock market, where shares of companies in the affected sectors experienced a notable decline. This downturn contributed to a broader slump in the benchmark Sensex, reflecting investor apprehension regarding the future prospects of these businesses. The primary concern stems from the anticipated disruption to India's export-oriented industries. Higher tariffs could translate into reduced export volumes, leading to job losses, decreased profit margins, and overall revenue declines for Indian companies. While the exact magnitude of the impact remains uncertain, businesses are actively preparing to mitigate the potential damage. This includes exploring alternative strategies to maintain competitiveness, such as diversifying export markets, optimizing supply chains, and enhancing operational efficiencies. A report by CareEdge Ratings suggests that India's direct export losses could range from $9 billion to $13 billion, representing a relatively small fraction of its GDP. The report also notes that India's domestically driven economy may provide some degree of resilience against the external shock. However, the timing of the tariff increase is particularly unfavorable. Indian companies were already grappling with rising input costs and a slowdown in urban consumption, factors that had contributed to a lacklustre performance in the quarter ended December 2024. Forecasts for the quarter ended March 2025 also pointed to subdued profits and sales, indicating a challenging business environment even before the tariff announcement. The uncertainty surrounding the corporate performance and GDP growth in the first quarter of FY2025-26 is now amplified by the potential impact of the tariff changes. Shares of TCS, the largest IT firm in India, experienced a further decline, as did those of Infosys. The declines reflect anxieties that US firms, facing higher costs due to the tariffs, will reduce their IT spending. Sumit Pokharna of Kotak Securities suggests that higher tariffs could lead to increased inflation in the US, potentially hindering the Federal Reserve's ability to cut interest rates. This scenario is not conducive to the IT sector, as lower interest rates typically stimulate economic activity and boost demand for IT services. Indian IT companies rely heavily on the US market, with approximately 70% of their export revenue originating from that region. Any retaliatory tariffs imposed on US exports by the US's trading partners could further exacerbate global inflation, reversing the recent trend of benign price pressures.
Tata Motors, a leading vehicle manufacturer, also experienced a significant drop in its share price following the announcement that the US had imposed tariffs on imported cars, light trucks, and select auto parts. The impact on Tata Motors is particularly pronounced because a substantial portion of the revenue generated by its subsidiary, Jaguar Land Rover (JLR), comes from the US market. Moreover, a wide range of auto parts will also be subject to tariffs, which could drive up car prices in the US. Arun Agarwal of Kotak Securities suggests that higher car prices could lead to a decline in sales volumes, impacting revenue for component suppliers who provide parts to the US car and light truck industry. Bharat Forge, which exports a significant portion of its auto components to the US, also witnessed a decline in its share price. However, some automakers, such as Maruti Suzuki and Mahindra & Mahindra, are expected to be largely unaffected by the tariffs due to their limited exposure to the US market. The pharmaceutical sector is also bracing for the impact of the Trump tariff policy. The US has indicated that pharmaceuticals will be included in the reciprocal tariffs in the next stage. This announcement sent shares of Sun Pharma and Cipla tumbling on the stock exchanges. India exports a substantial volume of pharmaceutical products to the US, making it the country's largest export destination. Furthermore, Indian companies supply a significant portion of the generic drugs consumed in the US. Any increase in tariffs imposed by the US administration could therefore have a substantial impact on pharma exports. Crisil notes that India has a large number of manufacturing facilities approved by the US Food and Drug Administration (USFDA), highlighting the country's importance as a supplier of pharmaceuticals to the US market. The Trump administration's trade policies are also raising concerns for steel and aluminium companies. These companies fear that the tariffs will lead to dumping from other Asian countries, putting pressure on their margins. As a result, shares of National Aluminium and Tata Steel have declined, reflecting investor anxiety about the future profitability of these companies.
While the overall impact of the tariffs is expected to be negative for many Indian industries, there are some potential beneficiaries. Textile firms, for example, may see an increase in their competitiveness in the US market. The US administration has imposed lower tariffs on home textiles and readymade garments from India compared to those imposed on other major textile exporting countries, such as China, Vietnam, Bangladesh, and Pakistan. This could provide Indian textile companies with an opportunity to increase their share of exports to the US. For Arvind, a major textile firm, the US is a key destination for its products. Overall, the Trump tariffs pose a significant challenge for Indian companies. Higher tariffs are likely to be passed through to consumers to some extent, leading to an increase in the prices of end products. This, in turn, could dampen demand over the medium term. Crisil highlights the importance of monitoring potential reversals in tariffs imposed on India and its competitors. These reversals could significantly alter the competitive landscape and affect the fortunes of Indian companies. The unfolding trade conflict between the US and other countries is creating a climate of uncertainty for Indian businesses. Companies are actively assessing the potential risks and opportunities and developing strategies to navigate the changing global trade environment. The ability of Indian companies to adapt to these changes will be crucial for their long-term success. The situation demands strategic agility, diversification, and a focus on innovation to maintain competitiveness in the face of protectionist headwinds. The future remains uncertain, but one thing is clear: Indian companies must be prepared to weather the storm of global trade tensions and adapt to the new realities of the international marketplace. Careful monitoring of policy changes, proactive risk management, and a relentless pursuit of efficiency and innovation will be essential for navigating this challenging period and ensuring sustained growth and prosperity. Ultimately, the resilience and adaptability of India's corporate sector will be tested as it confronts the complexities of the evolving global trade landscape.
Source: Trump Tariffs: India Inc faces the heat, TCS, Infy to Tata Motors and Sun Pharma in turmoil