Trump Tariffs: Sectors Likely To Be Worst Hit By Liberation Day Announcement

It is just a matter of hours when US President Donald Trump's reciprocal tariffs will be implemented. India stands on the cusp of this time-ticking bomb, which could disrupt the whole trade relation and policies with the US.

Trump is set to announce a flurry of tariffs today (Wednesday at 4 PM EST / 1:30 AM IST) from the White House Rose Garden. Trump, who has dubbed this day as 'Liberation Day', claims these tariffs will reduce the reliance of the US on foreign goods, which will work towards his rhetoric of Make America Great Again (MAGA).

Trump has labelled India as a "big abuser" of trade ties on multiple occasions. Earlier this week, White House press secretary Karoline Leavitt flagged that India charges 100 per cent tariffs on American agricultural products. Leavitt had said, "Unfortunately, these countries have been ripping off our nation for far too long, and they have made, I think, their disdain for the American workers quite clear.”

Sectors To Be Worst Hit By Trump Tariffs

The US has been India’s largest trading partner for the past three years. The US accounts for about 18 per cent of India’s total goods' exports, 6.22 per cent in imports and 10.73 per cent in bilateral trade. Evidently, the hardest hit sectors will be export-driven sectors if the US decides to go ahead with implementing the reciprocal tariffs on India-made goods. Majorly, India’s exports to the US include engineering goods, electronic goods, gems and jewellery, pharmaceutical products, light crude oil and petroleum, electrical, and others.

These sectors are likely to face additional tariffs because of the high tariff differential between the US and India. Tariff differential is the difference between the import duties levied by any two countries on a product.

According to IBEF, the government’s think tank, in FY24, the bilateral trade between India and the US stood at a record US$ 118.2 billion.

Of the total trade in FY24, Indian exports to the US stood at $77.5 billion, while American exports to India stood at $40.7 billion.

Exports From India To The US

In FY24, India exported engineering goods worth $17.6 billion, electronic goods worth $10 billion, and gems & jewellery worth $9.9 billion, according to IBEF.

Other major exports were medicines and biological products ($8.72 billion), petroleum products ($5.83 billion), and ready-made cotton garments with accessories ($4.71 billion).

Exports From The US To India

In FY24, India imported mineral fuels and oils worth $12.9 billion, a report by IBEF said.

Other major imports included precious and semi-precious stones ($5.16 billion), machinery like nuclear reactors and boilers ($3.75 billion), and electrical machinery ($2.38 billion).

Trump Tariffs’ Potential Impact On India’s Stock Market

If Trump unveils softer-than-expected tariffs, it is likely to lift the already beaten-down domestic market. However, if it turns out to be otherwise, it could trigger further sell-offs, experts say.

The domestic benchmark indices today, however, stayed buoyant ahead of the looming tariff deadline, gaining some ground after Tuesday’s sell-off. The Sensex surged 592.93 points, or 0.78 per cent, to end at 76,617.44, and the Nifty 50 too climbed 166.65 points, or 0.72 per cent, to close at 23,332.35.

Vinod Nair, Head of Research, Geojit Investments, said that despite mixed global signals around the impending US tariffs, the domestic market saw steady gains. He attributed this optimism to expectations that the tariffs would have little impact on India's economy, given the positive progress in India-US trade talks.

The domestic market has been factoring in the uncertainty around the trade policies of the US ever since Trump came to power. On a year-to-date basis, India’s headline indices – Sensex and Nifty 50 – have declined 2.41 per cent and 1.73 per cent, respectively. The indices, however, have gained some ground in the previous month, recovering around 5 per cent from February lows.