How Trump’s 26% Reciprocal Tariffs Could Impact the Indian Stock Market?

On April 2, 2025, US President Donald Trump made an announcement related to the reciprocal tariffs on trading partners. Donald Trump made no exclusion for any country as he announced reciprocal tariffs on more than 180 countries. In addition, Trump also announced the imposition of a 10% baseline tariff apart from country-specific tariffs.

Trump declared a 26% reciprocal tariff on India, which is half the rate India charges on U.S. imports. Additionally, he introduced a 25% tariff on automobile imports, a move that could affect auto stocks like Tata Motors and Samvardhana Motherson.

Impact of Trump’s Tariff on the Indian Stock Market

Trump’s tariffs could push a negative reaction in the Indian stock market, as indicated by the drop of ~0.21% in Gift Nifty at 08:15 AM on April 2, 2025.

Sectors such as IT and automobiles could experience selling pressure, but in the medium to long term, the market is expected to adjust to the impact. However, as per experts, Trump’s tariff may not have a major negative effect on the economy, which provides some reassurance for the domestic market..

Major Sectoral Impact

Electronic Sector

The reciprocal tariffs will impact the electronics sector, which relied on the U.S. for 32% of its exports during the fiscal year ending March 2024.

However, for Apple, which shifted part of its assembly operations to India, there remains a strong incentive to continue exporting phones from India to the U.S., given the 34% reciprocal tariff added to the existing 20% duty on imports from China.

Textile Sector

In FY24, India exported $9.6 billion worth of textiles and apparel to the U.S., representing about 28% of the total exports in this category. The new round of tariffs could make Indian exports more competitive compared to China and Vietnam, which held market shares of 21% and 19%, respectively, compared to India’s 6%. The reciprocal tariffs have raised duties by 34% for China and 46% for Vietnam.

Key textile stocks to monitor on April 3 include Welspun, Trident, Arvind Limited, KPR Mill, Vardhaman, and Page Industries.

Auto Sector

Truck exporters are likely to face challenges from the increased tariffs in the U.S. For example, Bharat Forge derives about 20% of its revenue from the U.S., while auto component makers such as Samvardhana Motherson (18.6% of revenue from U.S. exports) and Suprajit Engineering (21.78%) are also expected to be impacted.

Pharma Sector Exempted from Tariffs

US President Donald Trump has exempted pharmaceutical exports from the reciprocal tariff. This would come as a relief for companies like Sun Pharma (33% of revenue from the US), Dr Reddy’s Laboratories (48.5%), and Aurobindo Pharma(48.3%).

Certain items such as steel, copper, bullion, energy, and other minerals not available in the U.S. are exempt from the latest tariff announcements. The sharp 4% drop in global copper prices, triggered by the Trump tariffs, is expected to benefit Indian wire and cable manufacturers as well as aluminum producers like Hindalco and Vedanta.

Conclusion

Following the announcement of a 26% reciprocal tariff on imports from India by US President Donald Trump, the Indian stock market may see a negative reaction from investors. This announcement could impact major sectors like automotive, electronics, textile and others.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.