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Liberation Day USA: Know Which Sectors Are Likely To Gain Amid 26 Per Cent Trump Tariff Imposition On India

The US President reiterated his camaraderie with Prime Minister Narendra Modi but added that the US will charge India 26 per cent reciprocal tariffs in response to India’s tariffs on goods imported from the US

D-Street traded under pressure post US President Donald Trump’s historic ‘Liberation Day’ announcements. The headline indices closed lower with the Nifty ending at 23,250.10 levels, down by 82.25 points or 0.35 per cent and the Sensex ended at 76,295.36, down by 322.08 points or 0.42 per cent.

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The US President reiterated his camaraderie with Prime Minister Narendra Modi but added that the US will charge India 26 per cent reciprocal tariffs in response to India’s tariffs on goods imported to the US.

"Their Prime Minister (Narendra Modi) just left (US recently)...he is a great friend of mine, but I said to him that 'you're a friend of mine, but you've not been treating us right'. India charges us 52 per cent, so we will charge them half of that - 26 per cent," Trump said.

Notably the tariffs imposed on India are relatively lower than the tariffs imposed on other countries. The tariffs imposed on China, Vietnam, Taiwan and Bangladesh ranged between 32 per cent to 37 per cent.

The Ministry of Commerce and Industry said in a press release that it is trying to study opportunities which may arise following the announcement of the trade tariffs.

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“Keeping in view the vision of Viksit Bharat, the Department is engaged with all stakeholders, including Indian industry and exporters, taking feedback on their assessment of the tariffs and assessing the situation. The Department is also studying the opportunities that may arise due to this new development in the US trade policy,” the ministry said.

A report by news agency ANI which quoted an analysis by think-tank Global Trade Research Initiative (GTRI) also stated that the relatively lower tariffs can benefit India in several sectors. Here’s a look at some sectors where India stands to gain from the tariff imposition:

Textiles And Apparel

The textile sector is likely to gain from the imposition of relatively lower tariffs. Somil Maskara the Head of Research at Wallfort Financial Services Ltd told Outlook Money that the imposition of tariffs on countries apart from India that export textiles to the US has made Indian textile products competitive.

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“We can see that these heavy tariff rates are announced in other Asian countries like Bangladesh, Vietnam and China. Such heavy tariffs have now made our textile products competitive in the US market,” Maskara said.

Maskara added that India exported roughly $9.6 billion worth of textiles and apparel and has a 6 per cent market share in the US textile market. Other countries which have a significant presence in the US textile market include China and Vietnam. Tariffs of 34 per cent and 46 per cent have been imposed on China and Vietnam respectively.

“India exported $9.6 billion worth of textile and apparel in the US in FY24. India has roughly 6 per cent market share in the US and then China 21 per cent and Vietnam 19 per cent. So we believe that these lower tariff rates imposed on India will make our textile companies more competitive in the US market,” Maskara said.

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Following the announcement, shares of domestic textile manufacturers such as Vardhaman Ltd, Grasim Ltd and Trident Ltd closed higher by up to 20 per cent.

Electronics And Home Appliances

The domestic electronics and home appliances manufacturing sector is also likely to benefit from the imposition of reciprocal tariffs. Sreeram Ramdas, VP at Green Portfolio PMS told Outlook Money that the domestic electronics and home appliances sector is likely to benefit from the imposition of tariffs in the long term. He added that over a longer period of time companies like Foxconn might opt for setting up manufacturing in India to cater to the US market, shifting base from China.

“Much of the electronics and home appliances that’s manufactured for the US can potentially be manufactured in India in the very long term assuming these tariffs are here to stay. This will be a major win for the Indian players. For instance, companies like Foxconn would prefer to manufacture and assemble consumer electronics in India and export them to the US rather than go through the default Chinese route,” Ramdas said.

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Telecom Equipment

Ramdas added that domestic telecom equipment makers who cater to the US might also benefit from the imposition of tariffs. He added that Purchasing Indian telecom equipment might become an alternative to China-made equipment in light of the heavier tariff rate imposed on China. Notably, shares of telecom equipment maker Tejas Networks closed higher by 8.73 per cent at Rs 873.1 apiece on the NSE after the tariff announcement.

“Telecom equipment manufacturers selling to the US may come out as winners as US buyers begin detaching themselves from China and Vietnam,” Ramdas said.

Semiconductors

According to the ANI report which cited GTRI’s analysis, India is also likely to gain in the semiconductor space. While technologically advanced countries like Taiwan hold a large share in the US market, the imposition of a relatively higher (32 per cent) tariff rate on Taiwan can help India in seizing opportunities in parts of the semiconductor value chain such as packaging, testing, and lower-end chip manufacturing.

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Toy Industry

The report also mentioned that sectors such as toys where China and Thailand hold significantly large market shares, might become ‘vulnerable to tariff-related relocation’. Thus offering India an opportunity to scale up domestic production, and cater to markets like the US.

While tariffs have been imposed on most major sectors in India pharmaceuticals, copper bullion, energy and semiconductors have been kept exempt in the first round of tariffs. Ramdas added that while pharma remains ‘unscathed’ from Trump tariffs, the fate of auto component manufacturers is still ambiguous.

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