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US President Trump announced a 27% tariff on India, affecting auto and IT sectors. Indian equity indices fell, but pharma exports were exempted. Broader economic impacts are expected.
Trump imposes 27% reciprocal tariff on India (File image/Reuters)
US President Donald Trump has announced a 27% “Discounted Reciprocal Tariff” on India in an effort to restructure trade imbalances. This sweeping tariff impacts various sectors, including auto and IT.
Following Trump’s announcement, Indian equity indices closed lower on Thursday. The BSE Sensex dropped 322.08 points, or 0.42%, to settle at 76,295.36, fluctuating between 76,493.74 and 75,807.55 throughout the day. Similarly, the NSE Nifty50 fell 82.25 points, or 0.35%, to close at 23,250.10.
Relief and Concerns for Pharma Sector
Pharmaceuticals, accounting for nearly 14% of India’s exports to the U.S., were excluded from the tariff list, providing temporary relief to Indian drugmakers. However, brokerages like Jefferies cautioned that pharma-specific tariffs might be introduced later. They noted a minimal immediate impact on Indian drugmakers, with US-focused generic pharma stocks like Syngene, Gland Pharma, and Biocon among the biggest beneficiaries.
Citi supported this view, suggesting that the likelihood of US tariffs on Indian pharma was always low but the duration of the exemption remains uncertain. CLSA added that pharma stocks had already priced in a potential 10% tariff, making them likely to recover.
Economic Fallout Beyond Pharma
Brokerages warned of a broader economic impact on Indian exports due to the wide-ranging tariffs. Macquarie pointed out that auto exports, constituting 3% of India’s shipments to the US, will suffer, potentially affecting India’s GDP significantly. UBS described the tariffs as higher than expected, making some exports unviable and posing a negative development for the Indian market. Pharmaceuticals remain under review for future tariffs.
Bernstein projected that Trump’s tariff move could lead to extensive back-channel negotiations and suggested that many of the rates might not last beyond H2 2025.
IT Sector Risks and Potential Gains
Bernstein noted that while India faces higher tariffs, it could benefit from China’s steeper 34% duty effective April 9, as some U.S. companies might shift sourcing from China to India. However, the brokerage warned about the risk of declining U.S. discretionary spending affecting India’s IT services sector. Consequently, Bernstein downgraded Indian IT stocks to ‘equal-weight’ while upgrading healthcare stocks due to their limited tariff exposure.
Rising Opportunities For India
For India, the additional 27% tariff places it in the lower half of targeted countries, creating opportunities beyond traditional export sectors like engineering goods, electronics, gems and jewelry, textiles, and apparel, said Agneshwar Sen, Trade Policy Leader, EY India.
“The tariffs could also shift competitiveness in India’s favor in sectors where other regional exporters are more severely impacted. To maximize this advantage, India must not only negotiate with the US to maintain market access but also collaborate with FTA partners in Asia to restructure supply chains and seize new opportunities.”