Leading brokerages including CLSA, Nuvama, and Elara Securities have cautioned against the economic and market implications of former U.S. President Donald Trump’s fresh tariff measures, including a 25% import duty on Indian goods. While some macro indicators may soften the blow, analysts flagged sectoral vulnerabilities and risks to India’s perception as a safe haven for global investors.
CLSA said that Trump’s imposition of a 25% tariff and penalties related to India’s trade with Russia could alter India’s perceived position as a neutral and strategic trade partner. The firm noted that India’s ability to maintain a balanced geopolitical relationship with both the U.S. and Russia had so far benefited its safe haven status. However, the latest U.S. action raises doubts over whether India can continue leveraging this dual relationship, especially amid a bi-polar global order.
The brokerage added that these developments come at a time when Indian equities are already among the most expensive in the world, making them more sensitive to foreign fund outflows. A reduction in optimism around India’s relative trade advantages and higher tariffs could hurt key exporting sectors such as electronics, pharma, and industrials. CLSA also warned that if crude oil supply from Russia is curbed, it may drive prices up, adversely impacting India.
Nuvama, meanwhile, believes India’s overall GDP impact may be limited due to the small contribution of U.S.-bound exports, though the trade redirection to other nations could provide some cushion. It also noted that sustained INR weakness might help limit the tariff blow. However, it flagged the broader risk of a shrinking U.S. trade deficit, particularly amid a weaker dollar and higher interest rates.
Elara Securities projected a potential 30 basis points hit to India’s GDP growth in case a new trade deal isn’t reached with the U.S. The brokerage highlighted direct exposure for sectors like pharmaceuticals, auto ancillaries, industrial machinery, and gems and jewellery. However, it sees a possible upside for IT firms due to the weakening rupee. Elara also noted that India’s post-tariff trade rate now exceeds that of Vietnam, the Philippines, and Indonesia—posing a competitive disadvantage.
Disclaimer: The views expressed in this article are based on brokerage reports and do not constitute investment advice. Please consult your financial advisor before making any investment decisions.
