■ Indian automobile manufacturers like Tata Motors and Mahindra could face significant challenges if the US government imposes new tariffs on auto exports

■ Pharmaceutical sector may face higher input costs if US tariffs disrupt supply chains involving China, a crucial supplier for many Indian pharmaceutical companies

metro india news  I hyderabad

The global trade dynamics are shifting as the United States, under President Donald Trump, initiates new tariffs affecting major trading partners. While India is not directly targeted, the proposed reciprocal tariffs could have significant implications for its economy, particularly in terms of currency volatility, trade deficits, and sectoral impacts. The Indian government is actively working to mitigate these effects through duty reductions and negotiations for free trade agreements.

In the long run, India has an opportunity to position itself as a global trading hub despite the ongoing trade tensions. The Indian Rupee’s decline against the US dollar is a critical concern amid rising US tariffs. The depreciation of the Rupee increases the cost of imports, particularly crude oil, which India imports predominantly in dollars. This situation could exacerbate India’s trade deficit, making imported goods more expensive for consumers and businesses alike.

Additionally, Indian companies with dollar-denominated debts will face higher repayment costs, further straining the economy. As the INR weakens, the cost of essential imports will rise, potentially leading to a widening trade deficit. Although India has a trade surplus with the US, the overall trade balance may tilt negatively if the cost of imports continues to escalate. This trend poses risks for economic stability and growth, as businesses may struggle to manage increased operational costs.

Impact on Key Sectors: The proposed tariffs may disrupt several key sectors in India. For example, the technology sector, which relies heavily on US contracts, could see reduced demand if US companies cut back on IT spending in response to tariff-induced economic slowdowns. Similarly, the pharmaceutical sector may face higher input costs if US tariffs disrupt supply chains involving China, a crucial supplier for many Indian pharmaceutical companies.

Indian automobile manufacturers like Tata Motors and Mahindra could face significant challenges if the US government imposes new tariffs on auto exports. This could hinder their competitive advantage in the US market and affect their overall profitability. The automotive sector’s reliance on exports makes it particularly sensitive to shifts in US trade policy. On a more positive note, some sectors may benefit from the shifting trade landscape.

For instance, if US companies move their supply chains away from China, Indian firms in manufacturing and electronics—such as Tata Electronics—may see increased opportunities. This could position India as a favorable alternative for companies looking to diversify their sourcing strategies. By reducing duties on certain American products and engaging in free trade agreement negotiations with the UK and EU, India is positioning itself to counterbalance the potential negative effects of tariffs.

This approach not only demonstrates responsiveness to changing trade dynamics but also indicates India’s commitment to enhancing its global trade relationships.

(Manasvi Joshi, Girish Basantani, Abhishek Das & Vikrant Chaturvedi.Analysis by Brickwork Ratings.)