Here are the sectoral winners and losers from Trump's reciprocal tariffs

While India had claimed that US goods attract a weighted average tariff of 7.7% in India, the US calculations have likely included the entire trade deficit to report it at a whopping 52%, thereby attracting reciprocal tariffs at 27%.

First-order impact on Indian economy could be limited

While India’s trade surplus with the US has expanded from just about $24 billion in 2020 to $46 billion in 2024, it is largely attributable to India’s rising exports in general. The US’ share in India’s exports has remained stagnant at 17-18%. Moreover, India is largely a consumption-driven economy, with exports contributing to only 12% of GDP. With an 18% share in India’s exports, US exports contribute barely 2% to India’s GDP.

Furthermore, considering that all economies would be impacted by the sweeping tariffs imposed by the US, it will ironically lead to a much lower impact on each economy. Put differently, what hurts everybody effectively hurts nobody.

So, while export-oriented sectors could see more risk compared to domestic-focused sectors such as BFSI, the first-order impact on the Indian economy is expected to be negligible. Of course, higher-order impacts are likely to be felt across sectors. We will discuss this subsequently in this article.

US economy stands to lose the most

The reciprocal tariffs are not likely to serve the purpose. Shifting the base for manufacturing takes several years, and breakeven takes even longer. Given the perception that Trump’s tariffs are fickle and could pause or reverse on apparent whims, manufacturers are not likely to undertake the long-term capex required to shift bases.

In fact, the tariffs will be passed on to consumers, leading to accelerated inflation in the US. Meanwhile, corporates will hold off on large investments amid ecopolitical uncertainty, leading to lower private capex. Retaliatory tariffs imposed by impacted economies would hurt US exports as well.

Take any indicator, be it crude, US dollar, stock markets or US Treasury yields. Their knee-jerk reaction following the announcement of reciprocal tariffs screams heightened anticipation of a slowdown in the US.

Pain for the US = Pain for Indian IT

Indian IT derives almost 50% of its revenues from exports to the US. If the US economy slows down, the tech budgets of US firms would shrink. This trend is already evident in the Indian IT deal wins skewing towards smaller deals, as US firms refrain from making long-term expense commitments amid uncertainty.

Reciprocal tariffs have exacerbated the uncertainty, and the Indian IT sector has accelerated its recent fall by correcting by more than 4% in a single day following the announcement.

Indian textiles may benefit from higher tariffs on competitors

India’s textile exporters receive almost 30% of their export revenues from the US. However, India’s share of US textile imports stands at only 6-7%, with higher shares of China, Vietnam, Sri Lanka, and Bangladesh. Since they are now faced with significantly higher tariffs, at 54%, 46%, 44%, and 37%, respectively, Indian textile exporters enjoy a price advantage, allowing them to grab a larger market share in the US.

On cue, the sector saw a whopping 77% advance-to-decline ratio on tariff announcement even as the broad market index corrected, with some textile stocks appreciating as much as 20% during the day.

India's auto fortunes could diverge

Automobile and auto component makers will face no additional trade barriers beyond the previously announced 25% import, leaving India’s relative positioning unaffected in the US market.

Moreover, most Indian auto-makers either have limited sales in the US, or have manufacturing facilities in the US (such as M&M) allowing them to sidestep tariffs. But India’s domestic industry, especially in the premium segment, could be affected as the US negotiates lower tariffs in India for US-manufactured automobiles.

Auto component makers could also see diverging fortunes as certain players like Uno Minda have limited export dependence, the likes of Sona BLW have high US exposure, while those such as Samvardhana Motherson may be able to sidestep the impact of tariffs owing to their manufacturing facilities in the US.

Metals may see dumping

China may be one of the worst impacted from the tariffs. Apart from 54% tariffs on China, 46% has been imposed on Vietnam through which China had been allegedly rerouting its exports. The De Minimis tariff loophole is being closed up as well. In effect, China is being pushed into a corner.

Given surplus capacity, especially in the metals sector as China’s property sector struggles to recover, less restrictive economies can expect dumping of cheap Chinese commodities. This recently turned India into a net importer of steel after having remained an exporter for more than a decade, and eroded the margins of Indian steel majors. Their fortunes are expected to worsen, and the 0.8% correction in the sector reflects this outlook.

It's a mixed bag for other sectors

With cheap commodities being dumped from China, commodity-consuming sectors such as infrastructure can be expected to benefit. The stocks in this sector rose around 0.25% on Thursday. Another sector that could benefit is electronics, which accounts for 14% of India’s exports to the US. India has been handed an opportunity to ramp up its competitiveness in electronic component-manufacturing as China’s electronics face heavy tariffs.

Amid uncertainty and as central banks accumulate gold rather than the US dollar as reserve currency, gold prices have been appreciating sharply. Continued dollar depreciation and heightened uncertainty amid reciprocal tariffs are expected to push up gold further. Gold-backed financiers could benefit, while jewellery exporters could suffer.

For the Indian chemicals sector, even as the tariff was hiked sharply from 3.6% to 27%, it was raised similarly for its competitors in the US–EU (20%), Japan (24%) and South Korea (25%), thereby leaving India’s relative positioning unchanged. The sector’s return after the announcement was largely at par with the broad market index.

Pharmaceuticals, semiconductors, and energy have also received a reprieve, at least for now. The sectors cheered by rallying as much as than 2.25% on Thursday. Of course, the celebration may be short-lived if the US comes back with tariffs on the sector.

Tariffs are a lose-lose proposition, but not all hope is lost

In the words of Neelkanth Mishra, chief economist at Axis Bank and head of global research at Axis Capital, at the 8th Mint India Investment Summit, the new world order of protectionism would result in sub-optimal “local optima rather than global optima", leading to the global economy falling short of its potential.

But India is already in talks with the US to double the bilateral trade to $500 billion by 2030. A bilateral trade agreement is also in the works, and other economies are also willing to come to the negotiation table. India is also working out bilateral treaties with other economies with the objective of further diversifying its export markets as the world moves away from globalization.

Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser. X: @ananyaroycfa

Disclosure: The author does not hold any shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.