Global ratings agency Moody's, in a report, highlighted the sectors that are set to see the most impact from US President Donald Trump's harsh tariffs. The global ratings agency said companies in the automotive, steel, chemicals and business-services sectors in South and Southeast Asia are most exposed to evolving US policies, including the higher tariffs.
US is set to impose reciprocal tariffs from April 2. The companies in countries like India, which have a very big trade deficit with US, are most at risk, Moody's said. The agency also highlighted the sectors and the respective companies that may bear the brunt.
Business-services sectors:
Moody's said that while business services are not directly subject to tariffs, they are vulnerable to changes in the US immigration policy. "Stricter US immigration rules will shrink the labor pool and pose risks for companies operating in the US that are reliant on foreign workers. To better serve their customers with minimal disruptions, companies such as Tata Consultancy Services, Infosys and Hexaware Technologies, a 74 percent subsidiary of CA Magnum Holdings, had gradually increased onshore hiring in the US. India continues to be one of the world's largest sources of labor in the IT industry; nearly 75 percent of H1B visas issued in 2023 went to Indian nationals. Nonetheless, rated business service providers rely on these skilled workers for long-term US assignments, making them susceptible to immigration policy changes and higher costs," the report said.
The ratings agency, however, added that TCS and Infosys are better positioned to absorb the resulting increased costs with their "industry-leading profitability".
Infosys shares were trading in the red with marginal gains at Rs 1,588 apiece on March 17. TCS however dropped 0.48 percent to Rs 3,494 per share. Hexaware Technologies shares were trading flat at Rs 471 apiece.
Steel and Chemicals:
For steel and chemicals sectors, Moody's said that the proposed US tariffs will have minimal direct impact on the related companies. "Rated steel and petrochemical producers including Tata Steel, JSW Steel and PTT Global Chemical Public Company generate most of their earnings from Asia and they have little to no exports to the US," the report said.
However, it noted that the tariffs will likely divert some cheap exports to India. This would result in high supply in the region, affecting prices and profitability of the two sectors. Notably, the Indian steel industry already reels under flooding of cheap Chinese imports.
"JSW Steel's US operations in Texas and Ohio offer some relief, although limited, as they contribute only around 7 percent to JSW Steel's total revenue," Moody's said.
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