Trump tariffs shake global markets: How India stands out amid trade tensions

Trump tariffs: The US is important and accounts for 25% of global GDP. It has just announced a baseline reciprocal tariff of 10% on all countries. India stands relatively better off (26%) than other countries: China 34%, the EU 20%, Taiwan 32%, and Japan 24%.

US tariffs seek to narrow trade deficits of $1 trillion annually. The US exports $3 trillion vs $4 trillion in imports - a country with a deficit imports more goods and services than it exports.

Until the talks conclude, there is a 10% base tariff on all 180 countries. If imports become more expensive, the tariffs can increase US inflation by 1%.

Is India a bright spot vs global peers?

The effect of these tariffs on markets would be global; thankfully, India is better placed than the 180 countries on which US Tariffs have been imposed. The EU, China, India, and all other countries have arranged bilateral talks with the US over the next many months.

India's bilateral talks with the US is in September 2025; until then, no new tariffs will be imposed. The US can roll back tariffs if bilateral talks progress well. It is essential to state that markets will be volatile until the negotiations conclude.

While the headline 26% tariff in India is optically high, they are largely sector-dependent.

Trump tariffs: Sectoral losers & gainers

India is the largest exporter of gems and jewelry. The increased US tariff may impact the exports. The textile industry may have a neutral impact due to lower tariffs against competing nations like Bangladesh, China, and Vietnam.

US tariffs on cheaper oil from Russia, Venezuela, etc. can bother India and its refiners. India buys only a tiny percent from US as the freight of importing oil from the US is high.

On financials, Tariffs imposed by the US directly have no impact. Indirect pressure on Indian banking and NBFCs can lower economic activity, potentially soften credit demand, and raise asset quality risks, especially for trade-exposed NBFCs.

The Healthcare industry is relatively insulated. The US Government has found it challenging to curb rising healthcare costs, leaving the tariff rates unchanged. In the past, the US, via the FDA or Government price controls, has also found it challenging to curb imports as business economics in the pharma space remain favourable for companies exporting to the US.

The information technology industry, which is primarily services-oriented, hasted, has no direct negative impact from tariffs. However, external factors, such as a volatile macroeconomy, would have some effect.

Ways ahead

Canada and Mexico are excluded from additional tariffs since they have bilateral trade agreements and the IEEPA enactments. Countries will likely start exploring this route at one end of the spectrum and, at the other end, could launch counter-tariff measures. Another path ahead could be for US corporations to set up shop via FDI in foreign nations (India included). India is also in talks with the US, with a potential conclusion towards the end of CY25.

(The author is Chief Investment Officer—Equities, LGT Wealth)

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