US President Donald Trump has imposed an additional 25% tariff on Indian imports as a “penalty” for New Delhi’s continued purchase of Russian crude oil. This move takes the total US tariff burden on Indian exports to 50% — 20% higher than that on Chinese goods — significantly denting India’s export competitiveness.
The new tariff structure, announced late Wednesday, will come into effect after a 21-day grace period, starting August 27, 2025. While this window leaves room for a negotiated resolution, the options appear limited for both sides.
“We expect the markets to fall by 1-2% in a knee-jerk reaction, but most would expect a resolution of the same,” said Dhiraj Relli, MD & CEO of HDFC Securities. He estimates that if the tariffs remain in place for a full year, India’s GDP could take a 30 – 40 basis point hit.
Export-oriented sectors such as IT services, textiles, engineering goods, pharmaceuticals, and auto components are expected to bear the brunt. Additionally, retaliatory tariffs from India could trigger a wider US–India trade conflict, he added.
“Market participants will hope that these negotiations will resolve the issue before the actual implementation of the duties,” Relli said.
According to Santosh Meena, Head of Research at Swastika Investmart, from a structural standpoint, India remains a domestic consumption-driven economy, with limited direct exposure to the US, except in key sectors like IT, pharmaceuticals, and electronics, which are exempt from the current tariff announcement.
“However, sectors such as textiles, gems & jewellery, and leather may face sentimental pressure in the near term,” Meena said.
Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services Ltd, said that the 21-day buffer period leaves open the possibility of sectoral exemptions or negotiated relief.
“As it stands, this could bring exports from affected sectors – textiles, jewelry, auto ancillaries – to a standstill and hurt some of India’s labor-intensive sectors. We, however, see the broader economy staying resilient and remain convinced of a 2HFY26 consumption-led recovery,” Sen said.
He advises investors to buy the dip if market correction exceeds 5%, given the limited direct earnings impact on the listed universe and more attractive valuations below long-term averages.
Sen identifies the most sectors and stocks impacted by the US tariffs:
Textiles: Gokaldas Exports, Kitex Garments
Chemicals: Camlin Fine Sciences, Aarti Industries, Atul Ltd
Auto Ancillaries: Bharat Forge, Suprajit Engineering, Sona BLW Precision Forgings
If India cuts Russian crude imports as part of the settlement, Reliance Industries and the oil marketing companies (OMCs) are vulnerable – also, crude prices could spike, he added.
Pharmaceuticals and electronic manufacturing services (EMS) appear to be exempt from the tariff list for now. However, Sen cautions that sentiment around EMS stocks could be impacted depending on an announcement from Apple.
Sen outlines a cautious yet opportunistic investment strategy:
1. Look through the near-term volatility. “Trying to trade this uncertainty is highly risky. There are multiple variables at play – renegotiated tariffs, sectoral carve-outs and carve-ins, and India slowing Russian oil imports.”
2. Minimize exposure to export-oriented and globally exposed sectors. “Even if the final trade agreement is not as bad as it appears now, a sharp slowdown in the global economy looks inevitable”
3. Buy the dip: If the market correction goes above 5% from here, valuations would then be comfortable at well below the LTA and, the direct impact on the listed universe earnings is negligible. Also, this does not impede India’s 2HFY26 cyclical growth recovery, which is largely driven by domestic impulses.
4. Stick to sector preferences: Emkay maintains an overweight (OW) stance on Consumer Discretionary and Industrials, and an underweight (UW) view on Financials, Technology, and Consumer Staples.
Santosh Meena advises long-term investors to stay the course as this development is a part of ongoing global trade tensions and shouldn’t distract from India’s long-term growth potential.
“Near-term volatility is an opportunity — not a threat — for long-term investors,” he said.
For short-term traders, Meena advises to exercise caution.
“The short-term outlook remains uncertain due to a combination of muted Q1 earnings, stretched valuations, and global trade tensions. Market texture appears weak in the near term, so a defensive and selective approach is advisable. However, any significant correction should be seen as a buying opportunity, as earnings momentum is expected to improve from the next quarter onward,” he said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.