Moneycontrol Pro Panorama| Tariff Tussle: Should India hold its ground or give in to US demands?

Economists estimate an impact of 45-50 basis points on India’s gross domestic product growth after the second tariff was imposed.

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
The US President Donald Trump’s fresh salvo of an additional 25 percent levy on Indian imports on top of the already high 25 per cent tariff announced last week escalates tariff tensions between the two nations. The levy, which will take effect 21 days from August 6, will take the total tariff on goods imported from the world’s fifth-largest economy to a whopping 50 percent. This is among the highest levies by the Trump regime and could have ramifications on $190 billion of bilateral trade.

Economists estimate an impact of 45-50 basis points on India’s gross domestic product growth after the second tariff was imposed. The US duty package puts India on par with Brazil, but makes it worse off than China, Vietnam and Bangladesh. Importantly, the 50 percent tariff levied on a large part of India’s export basket certainly makes the country uncompetitive compared to competing nations, says Madhuchanda Dey from MCPro Research. The article analyses which sectors could be the worst impacted in the near term while also discussing the long-term impact of high tariffs on labour-intensive sectors and manufacturing.

The 21-day window on additional penalty, however, leaves room for negotiation between the two countries. The question is: Will India buckle or retaliate?

The bone of contention is India’s import of crude oil from Russia, which US perceives is fuelling the Ukraine war. India’s jab at the US, perhaps not unfounded, is that it is not the lone trader in the world with Russia and is doing so for “national interest”. Per data shared by international brokerage and investment house Goldman Sachs, the US accounted for 4 percent of India’s crude oil imports (in volume terms) in FY2025 while Russian imports were close to a third of total oil imports.

To be sure, there is hope in India that New Delhi might leverage its economic strength as the fastest growing country instead of buckling under American pressure on oil imports. For India, the choice is not about “either with Russia or the US”. It is about national interest.

That said, several recently concluded deals indicate that the US is likely to impose secondary tariffs but could use it to reach an agreement on areas such as agriculture, where India is refusing to compromise.

Besides, all this arm-twisting by the Trump government is not leaving US economy insulated from risks. Although Trump’s latest reciprocal tariffs are mostly lower than those he announced on “liberation day” on April 2, they raise the US’ effective tariff to its highest level in decades, free to read for Moneycontrol Pro subscribers. This could slow the pace of growth and push global growth into a slower lane.

As the leaders of the two large nations battle over tariffs, investors must cut through the clutter and gradually rejig portfolios. Dey’s article recommends portfolios with domestic focus. Defence is the top pick with sectors like domestic utilities, select capital goods, infrastructure, cement, healthcare, consumption staples and aspirational discretionary consumption being less vulnerable to tariff wars.

At the time of writing this newsletter comes news that Trump and Putin are to meet very soon, as early as next week even, according to media reports. By turning the screws on India, is Trump indirectly putting pressure on Russia to come to the negotiating table? If they can agree upon on a ceasefire on terms acceptable to Ukraine, then it could obviate the need to impose secondary sections such as the penalty tariff on India? Trump's executive order says as much. While war diplomacy and trade diplomacy play out behind closed doors, it's a tense time ahead for India's exporters and its economy, as it finds itself in the centre of a crisis not of its making. Will they escape unscathed is the big question.

Investing insights from our research team

JSW Cement IPO: Is it a solid contender for your portfolio?

All Time Plastics IPO: Should this flotation be on investors’ radar?

Britannia Q1 FY26: Is the stock crunchy enough amid cost headwinds?

Bajaj Auto delivers a mixed Q1

MTAR Technologies: Strong growth prospects despite a sequential decline

Trent: Q1 FY26 results beat estimates; strong growth prospects

Divi’s Lab: Better capex guidance to meet upcoming demand

What else are we reading?

Why retail investors can't get enough of small-cap stocks

RBI surveys show Indians are becoming more cautious on jobs, prices

Chart of the Day | Will the sharp rise in cement prices continue to ensure profit growth?

Technical Picks

The way to protect Indian companies from secondary sanctions

RBI signals end of rate cut cycle; MPC flags growth risks from tariffs

RBI MPC’s unanimous pause on rates reflects caution amid softening inflation and geopolitical uncertainty

Mint Road signals watchful pause

Keep calm and carry on is RBI’s message

Disinflation meets MPC hesitation as RBI fears inflation edging higher next year

China’s weaponisation of supply chains poses threat to India’s manufacturing ambitions

Crafting Voice AI for India: Innovations and challenges in multilingual voicebots

Markets

IFSCA mulls lower investment threshold for sustainable finance AIFs in GIFT City
Tech and Startups

Tech and Startups

Centre nudges ministries and states to act on new cybersecurity audit rules

Technical Picks: BLUESTARCO, PPLPHARMA, PERSISTENT, HINDPETROVatsala Kamat
Moneycontrol Pro