Moneycontrol Pro Panorama | Can India turn the tariff crisis into an opportunity?

Trump administration announced its intent to impose tariffs across economies.

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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.

In a knee-jerk reaction to US President Donald Trump's 25 per cent tariffs on Indian goods along with the threat of unspecified penalties for its defence and energy ties with Russia, the equity markets opened with a gap downward and the rupee fell to a record low. However, at the time of writing this newsletter, equity markets had already recovered on news that the trade talks between India and the US are still open.

The sharp recovery in equities is not surprising as the trade saga is far from concluded. However, analysts are not wrong in warning of pressure on India’s exports and growth. Some estimates from economists indicate a hit of 20-40 basis points for FY2025-26’s gross domestic product (GDP) growth from the 25 per cent tariffs, with additional penalties, if levied, clouding the outlook further. A report by Emkay Global Financial Services estimates that India’s US exports could drop by USD30-33bn (0.8- 0.9 per cent of GDP) at 25%+ tariffs, not adjusting for the complexity of dynamic cross-country hits/responses.

Besides, these trade deals in an era of global interdependence are complex both in negotiations and in their final outcome and impact. For instance, it's not clear on whether previously spared sectors (globally), such as pharma, electronics, energy, and minerals, would continue to be exempted for India too.

In today’s edition, MCPro offers a host of articles on the near-term impact of the 25 per cent tariff. My colleague Ravi Ananthanarayana, in this article, elaborates on the various scenarios that are likely to play out now that tariffs are in play. To be sure, uncertainty looms over India’s exporters, even though they may have been prepared for this.

When exports take a hit, fewer dollars flow into India, putting downward pressure on the rupee. A weaker rupee makes imports—especially oil, which India buys heavily—costlier, further stoking inflation, which is already a headache for the Reserve Bank of India. The only relief in this situation is that the prevailing low crude oil prices could ease the pressure on the rupee.

To be sure, the equity markets are likely to be volatile as it has been since the Trump administration announced its intent to impose tariffs across economies. The unpredictability of decisions is only exacerbating the woes of financial markets, in India and globally.

The moot question for the Indian economy as well its financial markets is whether Trump’s high duties will force it to back down on tariffs levied on US goods imported into India. Will India, titled the Tariff King, buckle under pressure from the US? The deadlock seems to be due to India’s refusal to concede on opening up domestic agri and dairy – the main bone of contention. It may be the opportune moment to permit technology transfer that would enable our farmers to quickly raise productivity and competitiveness, while slowly lowering protection.

The tariff troubles are a wake-up call and a welcome thing as they deliver a sense of urgency on our system to change, says our columnist on markets Shyam Sekhar, in this piece. India needs to seize the moment, he says. Further, going by the experience of other nations that have signed deals with the US (UK, EU, Japan, Indonesia, Vietnam), tariffs are still elevated and in return, these countries have given concessions to the US.

Today’s edition has a detailed analysis by MCPro’s Research team on the sectoral impact of tariffs in the near term. Sectors such as textiles, machinery, jewellery, pharma & chemicals, and aquaculture should be watched. Markets will feel the heat; read the article to know if this could be a buying opportunity for you.

Investing Insights

Triple factors that are likely to guide the market course in the near term

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Waaree Energies Q1: Execution strength drives growth

Gabriel India: Primed for growth but priced to perfection

KEC's T&D business powers earnings momentum

Mahindra & Mahindra shifts to high gear 

Tata Motors expands CV empire with Iveco Group NV acquisition

What else are we reading?

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Chart of the Day | Some indicators suggest the worst is behind for CVs

Mohamed El-Erian: Reasons for caution amid America’s triumphant market surge (republished from the FT)

Second in Line, Not in Power: The office of India’s Vice-President

25% Tariffs, 100% Wake-Up Call: Rethinking India’s trade sovereignty

Call Trump’s tariff bluff; diversify export destinations

Tech and Startups

Payment fintechs are getting squeezed as banks add charges for UPI merchant transactions

Markets

Trump tariff on India priced in, market experts say major impact on stocks unlikely

Technical Picks: Metropolis Healthcare, Coal India, Navin Fluorine, L&T

Vatsala KamatMoneycontrol Pro