Trump tariffs make it vital to fast-track trade talks with EU, New Zealand, Brazil: Assocham's Sanjay Nayar

While near-term growth could see some volatility, India’s medium-term outlook remains resilient: Assocham President

The imposition of 50 percent US tariff on Indian exports will mean India needs to accelerate trade negotiations with key trading partners like the European Union and New Zealand, while also exploring new opportunities with Brazil, Sanjay Nayar, President of industry body Assocham and a veteran in the global financial markets told Moneycontrol.

Trump's levy threatens India’s exports in high-exposure sectors such as gems & jewellery, textiles, apparel, auto-components, capital goods, oil-refined products and shrimps, Nayar has cautioned.

Speaking to Moneycontrol, Assocham President stressed on the need to diversify export markets to shield industry from protectionist shocks, while strengthening the competitiveness of India's micro, small and medium enterprises (MSMEs), integrating them into global value chains.

Edited Excerpts:

Q: How should Indian industry navigate the current global protectionist trade environment?

A: The Indian industry must navigate rising protectionism and economic nationalism by diversifying export markets, embracing friend-shoring and integrating into global value chains. The recent US tariffs make it vital to fast-track talks with the EU, New Zealand and other partners, while also leveraging recently concluded FTAs with the UK, UAE and Australia. With MSMEs being critical contributors to our exports, easing access to credit and cutting compliance costs will be key to strengthening their competitiveness.

Q: How serious is the escalation of 50 percent US tariffs, and which sectors are most exposed?

A: The imposition of tariffs marks a serious escalation and threatens bilateral exports significantly. Sectors such as gems and jewellery, textiles and apparel, electronics, auto-components, capital goods, oil-refined products and shrimp are particularly exposed. To preserve competitiveness, Indian exporters must rework trade strategies by boosting value-added production, diversifying client bases, and accelerating supply chain adjustments away from high-tariff exposure.

Q: How does this affect India’s role in the China+1 strategy?

A: While tariffs and trade tensions introduce fresh challenges, they have not fundamentally altered India’s position in the China+1 strategy. Some investors may adopt a wait-and-watch approach, but overall sentiment towards India remains optimistic, underpinned by strong macro fundamentals, proactive policy reforms and supply chain diversification. Apple’s decision to significantly ramp up iPhone production in India - even in the face of high US tariffs - along with plans to open more retail stores, underscores the country’s growing appeal as an alternative manufacturing hub. Sustaining this momentum will require regulatory stability and consistent execution to keep global investors engaged.

Q: What is the impact of these developments on MSMEs?

A: MSMEs remain highly exposed to global shocks such as tariffs, supply chain shifts and skilling gaps. While some have adapted through digital adoption and export diversification, many still lack the resources and scale to remain globally competitive. We have long advocated for targeted skilling initiatives to enhance MSME competitiveness. A government-backed internship or skilling programme would be a timely step, helping MSMEs build workforce capabilities, boost productivity and integrate more effectively into global value chains.

Q: Could these headwinds derail India’s ambition of becoming a global manufacturing hub?

A: Not at all. Our foundation is strong. While near-term growth could see some volatility, India’s medium-term outlook remains resilient. Strong domestic demand, competitive labour, a strategic location and supportive policy measures such as PLI schemes will continue to drive the manufacturing story. If anything, these disruptions may act as a catalyst for India to fast-track structural reforms and reinforce its global manufacturing proposition.

Q: From an investor’s perspective, do these disruptions raise concerns around geopolitical risk in Indian manufacturing?

A: From an investor’s perspective, geopolitical disruptions do raise concerns, but they also reinforce the need for strategic navigation. Global corporates are operating in a world characterised by volatility, uncertainty, complexity and ambiguity. Reshaping supply chains, financial planning and risk modelling becomes essential. While geopolitical risk may temper enthusiasm in the short term, India retains its attractiveness due to resilient market dynamics and strong policy momentum. Investors will closely watch how India manages bilateral relations and regulatory consistency.

Q: What are the biggest macroeconomic or policy risks that could derail India’s private investment momentum over the next few quarters? Do you see early signs of a funding winter?

A: Persistent global trade tensions, interest rate volatility and sluggish consumption recovery are key risks to India’s private investment momentum. Protectionist measures, such as the recent U.S. tariffs, could further dampen sentiment. However, India has successfully navigated past disruptions like the Russia-Ukraine war and the Red Sea crisis, emerging as the world’s fastest-growing economy. Strong macro fundamentals, policy continuity and robust FDI inflows continue to support investment flows. For the momentum to continue, speedy reform implementation, sector-level clarity and reducing operational friction will be crucial.

Q: Could these tariffs dampen foreign capital inflows into sensitive sectors?

A: Yes, the impact could be felt in sectors such as oil refining, textiles and auto components. Accelerating infrastructure upgrades, advancing regulatory reforms and introducing sector-specific incentives will be vital to sustaining investor confidence and ensuring long-term capital flows into these industries.

Q: Pharmaceuticals have been temporarily exempted from the new U.S. tariffs. Should exporters and investors in the sector be worried?

A: Yes, caution is warranted. India’s pharma sector is heavily reliant on the U.S. market, and any change in policy could have significant implications. Exporters and investors should remain vigilant, diversify their market exposure, and invest in compliance with evolving global standards. That said, India’s reputation as a reliable pharma supplier and strategic health partner provides some degree of insulation.

Q: What reforms are necessary to sustain investor confidence and capital inflows?

A: To unlock more private capital, especially in infrastructure-linked sectors, India must streamline land acquisition, simplify dispute resolution and ensure regulatory predictability. Enhancing viability gap funding, speeding up clearances and reforming PPP models will help de-risk long-gestation projects. At the same time, expanding high-quality FTAs, ensuring macroeconomic stability and pursuing a clear green transition roadmap will help India remain a preferred FDI destination despite global uncertainties.