New Delhi: US President Donald Trump is going to make a big bang on 2nd April. This can cause devastation in markets around the world. Trump can announce some new taxes to save domestic industries. This can further increase the already ongoing tussle between countries regarding trade. This is very big news for the Indian market. This can be the biggest change since Trump became the President. It is likely to affect India as well. America is India's second largest trading partner. If America increases tariffs on Indian goods, India will be affected. This will tell whether its impact on the market will be for some time or it will change some industries forever. The biggest question is whether the market has already anticipated this or there will be a sudden big reaction to this?
It is believed that the new tax that Trump is going to impose is a plan to balance trade with those countries that sell more goods than America. Complete information about this plan is not yet available. It also has to be seen whether these taxes will be in addition to the already imposed taxes or not. The purpose of this plan is that more tax will be imposed on goods coming from outside to America. This will make the goods expensive and people will buy more goods made in their country. These taxes can be imposed on countries like Japan, European Union (EU), Canada and Mexico. These countries sell more goods to America. India is also in this list and it can also suffer losses. However, it is believed that it will not have much impact on India.
Who will be hit the most
These taxes can cause problems in the supply of goods around the world. Especially in the field of automobile and electronics. The automobile industry is already in trouble as the US has announced a 25% tax on cars and their parts coming from abroad. This has led to a decline in the shares of auto and pharma companies recently. India exports auto parts worth about $1.5 billion. This may cause supply problems. Profits of companies like Bharat Forge and Madrasan Sumi may decrease. India also exports medicines worth about $8 billion to the US.
However, many economists say that it will not have much impact on India. According to SBI Research, the US tax may reduce India's exports by only 3-3.5%. S&P says that India's exports to the US are only 2.3% of its GDP. Therefore, the direct impact of the tax will be less. In response to the tariff imposed by the US, the European Union, Canada and China have also imposed taxes. This trade war may reduce GDP growth worldwide and increase inflation. However, India does not have much trade with the US and India's economy is mostly dependent on its own country. Therefore, its long-term impact will be less.
How much has the Indian market understood this?
Stock market experts say that there is little movement in the markets. This shows that the threat of new taxes has not been fully understood yet. Perhaps because it is not clear which sectors or goods will be directly affected. Anand Rathi Wealth's Director and Head - Product and Research, Chetan Shenoy said, 'Indian markets are paying attention to domestic issues like RBI policy, companies' earnings. If new taxes are imposed, it may cause movement in the market for some time. Especially in export-oriented sectors like IT and pharma. Auto and metal companies may also come under pressure.'
Vineet Bolinjkar, Head of Research, Ventura said, 'If this step is just for show or its scope is limited, then the market will soon bear this shock. Especially when the economic situation in the country is strong.' If taxes increase and become a major trade dispute or affect key industries, it could reduce India's exports, reduce foreign investment and cause supply chain problems around the world.
Who is most at risk?
The pharma sector will suffer the most because India sends $8 billion worth of medicines to the US every year. If taxes are imposed on this, the earnings of big pharmaceutical companies may decrease. Textiles and apparel are sectors where profits are already declining. Taxes may cause further losses to them. The US is a big market for engineering goods and auto parts. Taxes will increase prices and hurt Indian companies.
IT services may benefit or be unaffected, as most of the work in this sector is done from India. Sectors like FMCG, infrastructure and banks that work mostly in India and send less goods to the US may remain safe. Bolinjkar said, 'Despite the threat for some time, the market can get support from many things. Demand in the country is strong, the government is spending on infrastructure, inflation is coming down and RBI can reduce interest rates in the second half of the year 2025. Foreign exchange reserves are strong, which will support the value of rupee.
There will not be much change in it. All these things can save us from the threat of tariff. Apart from this, India is becoming a manufacturing hub. India can also benefit from this.
