Stock investors are a concerned lot as the US President Donald Trump suggested that India will be among the countries on which reciprocal tariffs would be imposed from April 2. A 25 per cent tariff has already been imposed on aluminium and steel, which accounted for under 2 per cent of India’s export to the US.
At worst, 30 per cent or $25 billion of India’s merchandise exports to the US may be impacted, said Nirmal Bang Institutional Equities. The brokerage said some of the products on which tariffs may be imposed include electronics (smart phones), automobiles, gems & jewellery, textiles, chemicals and seafood exports. It believes some chemicals may face tariffs, but pharmaceuticals may not be impacted much, given that it may be seen as a necessity for US.
"While tariff differentials on textiles are modest, India has significant market share in US imports of various types of textiles, as a result of which it may be impacted by tariffs," Nirmal Bang said.
The brokerage said if tariff differentials between India and US are used as a yardstick, the differential is highest for agricultural goods. That said, agricultural products, do not feature among India’s top exports to US, it noted.
"By pursuing trade negotiations, rationalizing tariffs, and embracing competitiveness over protectionism, India is laying the groundwork for a stronger economic partnership with the United States. This strategy may prompt the Trump administration to favor nuanced agreements over broad tariffs, benefiting both nations. However, the risks of dumping and currency volatility underscore the need for vigilance and adaptive policymaking. As the global trade war unfolds, India’s ability to balance openness with resilience will determine its long-term success in navigating these turbulent waters," YES Securities said.
Market fall
While the equity benchmarks are down 15 per cent from their recent highs, SAMCO's Apurva Sheth noted that 87 per cent of the NSE-listed stocks are now trading below their 40-week exponential moving averages (EMAs). This, he said, is even lower than the levels seen during the June 2022 market bottom when 82 per cent of stocks were trading below their 200-day EMAs.
"Such low readings usually signal that the majority of the selling pressure is behind us. Historically, when markets reach such oversold conditions, they tend to bounce back as investors start looking for value buying opportunities," Sheth said adding that Trump tariff are likely priced in.
India tariffs
The US National Trade Estimate Report (NTER, 2023) suggested that India’s average Most-Favored-Nation (MFN) applied tariff rate was 18.3 per cent in 2021, which was the highest of any major world economy, with an average applied tariff rate of 14.9 per cent for non-agricultural goods and 39.2 per cent for agricultural goods.
India’s bound tariff rates on agricultural products are among the highest in the world, averaging 113.1 per cent and ranging as high as 300 per cent. The NTER also noted that India maintains high applied tariffs on a wide range of goods, including vegetable oils (as high as 45 per cent); apples, corn, and motorcycles (50 per cent); automobiles and flowers (60 per cent); natural rubber (70 per cent); coffee, raisins, and walnuts (100 per cent); and alcoholic beverages (150 per cent).
In addition, India maintains very high basic customs duties, in some cases exceeding 20 per cent, on drug formulations, including life-saving drug
India-US deal
Nirmal Bang said India is doing all it can to mitigate the impact of tariffs through active engagement with US.
It noted that steps have been taken in the Budget 2025 to reduce tariffs on motorcycles and alcoholic-beverages. Tariffs on completely built units of Motorcycles were slashed between 10-20 per cent in the Budget while it was slashed by 5 per cent for semi-knocked down and completely knocked down units.
"The customs duty on bourbon whiskey has been cut to 100 per cent from 150 per cent. Similarly import duties on wines were also reduced. Moreover, India has committed to defence purchases and is exploring oil purchases. A potential India- US trade deal may eventually iron out some of the issues around tariffs and market access on both sides," Nirmal Bang said.