“Friend” India Gets a 25% Reality Check from Trump – Why the Markets Aren’t Panicking
- 31st July 2025
- 04:00:00 PM
- 3 min read
Mumbai | July 31 – India may be called a “friend” of the U.S., but trade doesn’t run on friendship.
In a sharp turn, former U.S. President Donald Trump announced a 25% tariff on key Indian exports, citing national interest and protecting American manufacturing. The move sent ripples across export-heavy sectors—but India’s stock market didn’t blink.
Despite opening deep in the red, the Nifty50 recovered over 700 points intraday. The Sensex followed suit, closing almost flat. No crash. No panic.
What triggered the tariff?
Trump cited rising imports from India as a threat to U.S. jobs and industry. The tariff applies to a select basket of goods: garments, jewellery, auto parts, and some FMCG items. It’s a loud political signal. But it’s not a blanket trade war—yet.
PL Capital’s read: Stay selective
Analysts at PL Capital remain underweight on IT, citing global uncertainty.
“Clients are cautious. Tech spending is under review. That directly hits Indian IT deal flow,” PL noted. On the other hand, PL is positioning toward domestic capex plays, financials, and rural themes—sectors with low export dependence.
Who gets hit?
Here’s where the tariff pinches most:
- Textiles & apparel: Major MSME employers with thin margins.
- Jewellery & leather: Already facing weak global demand.
- Auto ancillaries: Especially Tier-2 vendors exporting to U.S. OEMs.
- Packaged consumer goods: Certain processed foods, niche exports.
These sectors could see order slowdowns, pricing pressure, and margin hit.
So why didn’t markets crash?
Investors were bracing—but not for a meltdown. Here’s why:
- Tariff scope is narrow
Large-cap sectors like banking, energy, and telecom are untouched. - Exports aren’t the core story
India’s economy is largely domestic-driven. Exports contribute ~20% of GDP. - Dip-buying came early
DIIs stepped in fast. Stocks rebounded from the day’s low. - Hopes of diplomacy
This isn’t the first tariff warning from Trump. Negotiations often follow headlines. - Exporters were already discounted
Many export stocks were already trading at depressed valuations.
The bigger takeaway
India may be courted as a geopolitical ally, but trade policy doesn’t follow friendships. Markets know this. That’s why the reaction was sharp but short. The structural India story—domestic demand, infra push, digital adoption—is still intact.
But the tariff is a warning: Don’t rely on global goodwill. Hedge your risks.
The bottom line
A 25% tariff sounds huge. But the actual hit to India Inc. is sector-specific, not market-wide. For now, investors are staying calm. But earnings season will be the real test—especially for exporters. Watch for margin commentary, order book trends, and management guidance.
The trade chill may have just begun. But for now, the market is warm enough to hold steady.
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
