Advertisement
X

US Tariffs On Indian Imports From Aug 27: Key Sectors At Risk

The additional 25 per cent US tariffs on goods imported from India are set to come into effect from August 27. Know which sectors are going to be affected the most

Here are the sectors that will be affected by the US tariffs (AI-generated) Photo: Gemini AI
Summary
  • Trump’s 50 per cent tariffs come into effect on August 27, 9:31 AM IST

  • US accounted for nearly one-fifth of India’s overall goods exports in FY24

  • These tariffs will impact about $48 billion of India’s exports to the US

Advertisement

The US Department of Homeland Securities (DHS) issued a draft notice late on August 25 stating that the United States (US) will move ahead with its plan to impose an additional 25 per cent tariff on imports of Indian goods. This draft notice confirmed the failure of India-US negotiations for a trade deal.

The initial 25 per cent tariff is already in effect from August 7, and the additional 25 per cent tariff will come into effect from 12:01 AM EDT (9:31 AM IST) on August 27, the draft notice said. This cumulatively amounts to a total 50 per cent tariff, among the highest rates the US President Donald Trump's administration has imposed on any of its trading partners recently.

Reacting to the development, the domestic stock market plunged on August 26. The Sensex closed 849.37 points, or 1.04 per cent lower at 80,786.54, and the Nifty 50 slipped 255.70 points, or 1.02 per cent, to settle at 24,712.05.

Advertisement

Sectors To be Impacted The Most

All sectoral indices closed deep in the red in today’s session, except fast-moving consumer goods (FMCG), as investors rushed to defensive sectors. This is a broad sentimental reaction, reflecting investors’ cautious approach ahead of the August 27 deadline. However, the real impact will be on those sectors facing the highest tariff and that are more dependent on revenues from the US.

According to Vaqarjaved Khan, CFA, senior fundamental analyst at Angel One, labour-intensive sectors with high US dependency would feel the most pain. “Textiles and apparel, gems and jewellery, footwear and seafood (shrimps) will be the most affected sectors,” he said.

Ready-Made Garments: Tariff on readymade garments at 50 per cent, he said, puts India at a significant disadvantage to its competitors such as Bangladesh and Vietnam, which face a tariff of 30 per cent.

Gems & Jewellery: Khan said India exports nearly $10 billion worth of gems & jewellery to the US.

Advertisement

Leather & Footwear: In leather and footwear, which is a labour-intensive sector, the fundamental analyst said, a 50 per cent tariff is significantly higher than competing countries like Vietnam and Indonesia, putting India on back foot.

Shrimps: Shrimp export to the US is a big market for Indian companies; a 50 per cent tariff on them puts them at a big disadvantage as compared to global competitors such as Ecuador, he said.

In addition to the above-mentioned sectors, the proposed 50 per cent tariff on selected categories of goods could impact other industries as well, such as pharmaceuticals, chemicals, engineering goods, toys, and furniture – industries where India has traditionally enjoyed a competitive edge, Ninad Jadhav, equity research analyst at LKP Securities, said.

US Constitutes One-Fifth Of India’s Goods Exports

According to the US Trade Representative, the US imported goods worth $87.3 billion from India in FY24. With India’s total merchandise exports at $437.1 billion in the same year, the US accounted for nearly one-fifth of India’s overall goods exports. This excludes services exports, which stood at $341.11 billion in the same year.

Advertisement

According to the Ministry of Commerce, these tariffs will hit about $48 billion worth of India’s exports to the US.

“This isn’t just about trade flows. It’s about jobs, incomes, and India’s growth story. Exports worth $48 billion are directly in the line of fire. The knock-on effects on the rupee, inflation, and investor confidence will not be small,” said Manoranjan Sharma, chief economist, Infomerics Ratings.

Market Outlook

Indian markets are set for a volatile week ahead as investors will be looking for further significant tariff announcements overnight. Notably, the stock market in India will observe a trading holiday on August 27, as exchanges will remain closed on account of Ganesh Chaturthi.

Karan Aggarwal, CFA, co-founder and CIO, Elever, a quant-based PMS, said, "Even if US-India tensions simmer down in the next few weeks, markets are looking at multiple risk events in the form of a US ‘stock bubble’, $11 trillion debt rollover in the US, and AI-related IT layoffs till March 2026."

Advertisement

Aggarwal added that domestic equities have limited upside risk in the rest of 2025. He recommended investors to play safe with limiting exposure to defensive plays around local themes of low inflation and domestic consumption like FMCGs, utilities, insurance, tractors, fertilisers, seeds, and two-wheelers for the next six months.

Looking forward, he said, markets can give multiple dips on account of global factors. He suggests these dips must be used by investors to take positions in infra plays like construction, cement, defense, railway, and infra financing at attractive valuations, as the next leg of growth is expected to come from public capex.

Jadhav of LKP Securities said that the immediate concern is pressure on export growth, margin compression, and a wider trade deficit, triggering selling in export-linked stocks and weakening the rupee. “While near-term volatility is likely, India’s strong domestic demand, cooling inflation, and healthy forex reserves provide buffers, suggesting that the structural outlook remains stable despite external headwinds,” Jadhav said.

Advertisement
Show comments
Published At: