【India】Donald Trump’s 50% Tariffs on India: Impact on Stock Market and Investor Strategy Explained

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Editor’s Note

This article highlights the market’s cautious stance following new US tariff measures on India, which have introduced significant uncertainty for investors. The piece outlines the immediate financial implications and the broader context of trade relations, underscoring the need for clarity in the evolving economic landscape.

Donald Trump’s 50% tariffs on India: What does it mean for the stock market & what should investors do? Explained
Market Reaction and Investor Hesitation

The stock markets are in a wait-and-watch mode over US President Donald Trump’s tariff moves on India. Trump on Wednesday announced a 25% additional tariff rate on India for its crude oil trade with Russia. This doubles the tariff rate on India from 25% to 50%. While the base line 25% rate is effective August 7, the additional rate will kick in from August 27.

According to an ET report, investors remain hesitant to deploy additional capital, awaiting either a US-India trade agreement or a market correction on Dalal Street that would present buying opportunities.

Expert Analysis on Export-Oriented Sectors

Despite the Sensex showing a relatively modest decline on Thursday, indicating partial market adjustment to higher tariff expectations, market experts caution that export-oriented stocks may face significant pressure, with uncertainty likely to continue for several months.

The US tariffs on Russian crude imports have reached levels that Nomura analysts compare to trade restrictions. The proposed 50% rate exceeds China’s by 20% and Pakistan’s by 21%, potentially affecting multiple export sectors with substantial dollar value.

“This is a tough period to navigate for investors,” warns Seshadri Sen from Emkay Global. “The terms of the final trade deal could still be considerably different, though a worst-case, highly damaging scenario has presented itself.”

Industry-specific impacts are being assessed systematically. Sen identifies key vulnerable sectors:

“The most-impacted sectors are textiles (Gokaldas/Kitex), Chemicals (Camlin, Aarti and Atul), and Auto Ancs (BHFC/Suprajit/Sona BLW), with direct export exposure to the US.”
Nomura’s Assessment and Sectoral Risks

The potential consequences are highlighted in Nomura’s assessment:

“If effective, the steep 50% tariff would be similar to a trade embargo, and will lead to a sudden stop in affected export products. The lower value addition and thinner margins across a number of industries (textiles, gem & jewellery) could jeopardise operations, especially of smaller firms that will struggle to compete.”

Several crucial sectors direct 30-40% of their worldwide exports to America. The proposed tariff increase poses a significant challenge for textile, gems & jewellery, and leather industries, which typically operate with minimal profit margins.

Risks for US Brand Franchises and Currency Impact

SBI Securities has identified potential risks for Indian firms operating American brands. The brokerage advises against investing in US brand franchises within India, citing possible swadeshi movement resurgence and American product boycotts. They specifically identify Jubilant Foodworks (Dominos, Dunkin Donut), Westlife (McDonald’s), Devyani International (Burger King), Varun Beverages (Pepsi), and Sapphire Foods (KFC, Pizza Hut) as susceptible to increased selling pressure.

Aditya Birla Sun Life AMC’s Mahesh Patil notes the similarity with Brazil’s situation, stating:

“We are now at par with Brazil, which provides a blueprint, it saw a 6-7% fall from the peak before recovering in local terms.”

The depreciation of the rupee, despite its challenges, presents an unexpected advantage.

“The immediate casualty is the INR, which will take the brunt—this will provide some respite for exporters. Counterintuitively, a fall in the INR (once it stabilises) is positive for local earnings, and hence equities benefit with a lag,” Patil elaborates.
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⏰ Published on: August 07, 2025