Trump 25% Tariff: How Different Sectors Likely to Impact on July 31 Trade?

In a significant policy move, US President Donald Trump has announced a 25% tariff on Indian imports, effective August 1, along with penalties on India for continuing oil purchases from Russia. This marks a steep escalation in trade tensions between the two nations.

Indian Stock Markets Set to Open Lower

The 25% tariff announcement has impacted the investors sentiment ahead of Thursday's market opening. Benchmark indices Sensex and Nifty 50 are expected to start in the red, reflecting concerns over export-linked sectors.

Meanwhile, Asian markets traded mixed in early trade on July 31, and US indices closed mostly lower, influenced by the Federal Reserve's latest policy decisions and commentary from Fed Chair Jerome Powell.

Key Export Sectors at Risk

The US remains India’s largest export destination, accounting for 17.7% of total shipments in FY24. Sectors like electronics, gems & jewellery, pharma, and refined petroleum are expected to be hit hardest by the new duties.

Top Exports to the US – FY24 Snapshot

Pharma Sector Faces the Heat

India's pharmaceutical exports could be one of the biggest sectors impacting from the tariff, which now face a steep jump in tariffs from 0% to 25%. This could have a significant negative impact on stocks like Sun Pharmaceutical, Lupin, and Dr Reddy’s Laboratories, as over 50% of their exports are US-bound.

Chemical Exports Under Pressure Amid Trade War

Chemicals, including pharma products, are India’s strongest export segment to the US, still holding a competitive edge over China. However, new US tariffs of 25% on India (versus 30% on China) threaten that lead. Note: the tariff on Chinese goods is set to expire on August 12.

India, China, and Singapore are the top three chemical exporters to the US, making this a critical sector.

Jewellery Sector Faces Steep Tariff Hike

The gems and jewellery segment, which sees 30% of its exports directed to the US, will face new challenges. Notably, cut and polished diamonds worth $5.6 billion were previously tariff-free, this changes from August 1. Tariffs on gold and silver jewellery (plain or studded) will jump by 19 percentage points, posing a challenge to key players like Rajesh Exports, Titan, and Kalyan Jewellers.

Textile Sector Impact

For Indian textile exporters like Welspun Living, Arvind Limited, and Alok Industries, the situation is complex. Tariffs on cotton apparel and textiles will spike sharply, while carpets and knitted fabrics, already subject to tariffs of 15% to 20%, may not see as dramatic a change.

Also Read: Nifty Weekly Expiry: No Stocks Under F&O Ban on July 31

Conclusion

The 25% tariff indicates a challenge for India’s export sectors, particularly pharmaceuticals, jewellery, and seafood. As a result of this, exporters will need to reassess cost structures and explore new markets, while investors should closely monitor sector-specific stocks for volatility in the days ahead.

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