The recent implementation of a 26% tariff on Indian exports to the US marks a significant shift in trade relations. On April 5, President Trump announced a blanket 10% tariff. Countries which had trade deficits with the US were to be charged this rate and higher rates. All of this has sent panic throughout Indian export markets. Such tariffs, which take effect on April 9, are expected to cause disruptions on the US$91.23 billion goods exported by India to the US in 2024.
Key Highlights
Monthly trade figures for 2024 show that US imports from India range between US$6.39 billion-US$8.35 billion. These numbers depict prime revenue avenues for Indian companies from various segments. However, the new tariff structure disrupts this long-standing pattern, as companies will have to reconfigure their strategy for the US market.
The disproportional distribution of tariff imposition is visible across different countries. Pharmaceuticals seem to be the worst affected with the Nifty Pharma index already down by 1.7% post-tariff announcement. The greatest pressure will be experienced by the consumer electronics, precious stones exporters, and textile companies depending on how much this market involves them as a source of income and on margins.
The main export sectors also show varying degrees of impact in terms of export volume, substitutability, and profit margins. In general, the pharmaceutical and textile industries are more vulnerable immediately since the competitive environment and low margins are more favorable toward specialized products.
| Sector | 2024 Export Value (USD) | Estimated Tariff Impact | Stock Performance |
| Pharma Products | US$7.55 billion | High | -1.7% (Nifty Pharma) |
| Electronics | US$9.89 billion | Medium-High | Varied |
| Precious Stones | US$10.17 billion | Medium | Stable |
| Textile | US$2.64 billion | High | Declining |
| Machinery | US$5.99 billion | Medium | Varied |
When Gland Pharma and Lupin saw stocks tanking to the extent of 6%, it signified an immediate market reaction. Nevertheless, in certain sectors where the companies have specialized products or where there are extensive intellectual property protections. Tariffs might not affect pricing ability. Which explains the varying effects across the export spectrum.
Forward-thinking companies have begun implementing mitigation strategies. This includes diversifying output with export markets, renegotiating supplier contracts, and exploring manufacturing bases in countries with preferential trade to the US. Such actions will separate the winners from the losers in the market in the next few decisive months.
Opportunities are now created for value investors by the market reaction. Companies with strong balance sheets, diversified export destinations, and essential products may weather the storm better than anticipated. The indiscriminate selling across export-oriented stocks ignores fundamental differences in companies' ability to navigate trade barriers.
Previous trade tension between the US and China meant restructuring and alternative market availability for companies. The good thing about these lessons is that Indian companies that successfully navigated through these hurdles of past trade disputes would have lessons on how to turn policy challenges into strategic advantages.
GTRI projects a US$5.76 billion decline in US exports, representing a 6.4% decrease. This may accelerate India's existing trade diversification efforts. While it might raise the specter of a potentially 20-40 basis point reduction in economic growth. That pales in comparison to gains imaginable in other markets, as Indian companies reorganize to adapt.
The impact of Trump's "America First" agenda extends beyond immediate stock movements. Investors should look beyond headlines to identify companies with resilient business models, diversification strategies, and adaptable supply chains. The current market reaction may present unexpected opportunities for those willing to take a longer view of India's export potential.