Daily Voice: Trump's 25% tariff on India poses key challenges, especially for these 5 sectors, says Waterfield's Vipul Bhowar

The measure is intended to extract trade concessions from India and to exert pressure on the country to reduce its cooperation with Russia, utilising America’s market access. This development complicates ongoing trade negotiations and has the potential to strain the steadily growing relationship between the United States and India, particularly as both nations seek to reduce their dependence on China.

Do you believe this tariff rate will have a significant impact on India, considering its trade dynamics with the United States?

The implementation of a 25 percent tariff poses challenges for Indian equities, especially for sectors with a significant proportion of exports to the United States. Notably, the top five commodities exported to the US include electrical equipment and parts (18 percent share), gems and jewellery (11.5 percent), pharmaceuticals (11 percent), machinery (8 percent) and petroleum products (5 percent). A better deal with China by US will be a grave threat to India’s ‘China+1’ policy framework. It will also risk FDI flows.

Do you expect any meaningful change in the tariff rate once India initiates fresh discussions with the US administration?

Although a significant alteration to the tariff rate is not anticipated prior to the August 1 deadline and the tariff increase remains imminent, ongoing and forthcoming negotiations may result in reduced tariff rates or a more advantageous trade arrangement later in the year. Fresh discussions are scheduled for mid to late August, with the expectation of establishing a broader trade agreement by September or October.

Which sectors are likely to be most affected by these tariffs? Will there be any significant impact on the IT sector?

The sectors most likely to be affected include electronics (including smartphones), automobiles and auto components, pharma, textiles, gems and jewellery, steel, aluminium, marine products, and various food categories. There could be a slowdown in IT spending and contract signoffs due to the wider economic uncertainty and tariff-driven cost increases.

What policy measures should India consider to effectively reduce tariff-related pressures and support long-term economic growth?

India should focus on clear policies that balance fair tariffs and better trade processes. This includes providing targeted protection, offering government incentives, and forming strategic trade agreements. These steps will help domestic industries grow, improve their connections to global value chains, and increase exports. By doing so, India aims to achieve sustainable economic growth and become a leading global economic player by the mid-21st century.

Do you think the worst of the market’s reaction to the tariff news will be over after the initial response in the upcoming sessions, given the ongoing consolidation since the start of this month?

The market is likely to react strongly right after the tariff announcement. Investors might start to stabilize or recover moderately as they adjust to the new situation and look for progress in trade talks. However, we could still see ongoing ups and downs due to uncertainty in policies and overall economic effects.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.