Can India dodge Trump’s trade tariff bullet? Depends on the sector and trade pact talks

Subscribe to enjoy similar stories. US President Donald Trump announced sweeping reciprocal tariffs on its trading partners on 2 April, a move aimed at reducing the country’s dependency on foreign products amid its ballooning trade deficit. Trump announced a 26% tariff on imports from India, effective 9 April.

Companies in sectors such as apparels & textiles and chemicals, which have a higher exposure to the US, may bear the brunt of the new tariff, given the risk of muted near-term order flows and pricing pressures amid the disruption in global supply chains. That said, a silver lining is that the direct impact of this development on India is likely to be limited. “At the first glance, the 26% tariffs imposed on India seem rather high, higher than what India levies on most US items.

However, two of India’s high-ticket exports — IT services and pharmaceuticals, are untouched by this announcement (the latter being in exempted list)," Bernstein said in a report dated 3 April. Also, other Asian countries have been levied with relatively higher tariffs, so India may get a competitive edge, even if it’s limited. (See chart) “Items like apparels and auto parts will see major tariff raises, but India seems protected from a competitive point of view, as tariffs on several south Asian economies that compete with India on these items are even higher," added Bernstein.

The reciprocal tariffs are certainly a sentiment dampener, but the expectations are that trading partners including India would negotiate with the US to ease some of them. In this backdrop, a key event to watch out for is the India-US Bilateral Trade Agreement, which is likely to be finalised in the months ahead. “A likely outcome is a tariff swap: the US could roll