U.S. Tariff Threats: Navigating Risks and Opportunities for India’s Export Landscape.
~Sumon Mukhopadhyay.
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With tariffs looming, the tremors are already rippling across key sectors, demanding urgent strategic recalibration from policymakers and businesses alike.
However, at first glance, it looks like yet another routine skirmish in the trade war playbook. But beneath the headlines lies a deeper reality: sectors tied to global demand are set to feel the heat, while the domestic investment narrative undergoes a quiet reshuffle.
Export-heavy industries—apparel, leather, gems, and chemicals—are bracing for tighter margins and reduced order flows. Market watchers warn that these headwinds could drag sentiment across mid-cap exporters for the coming quarters.
And yet, in this disruption lies opportunity. Historically, when global trade tensions flare, investors reallocate capital into sectors less exposed to external shocks. Telecom, for instance, emerges as a relative safe haven. Anchored in domestic demand, fuelled by India’s ever-rising data consumption, and largely insulated from tariff crossfire, the sector looks positioned to attract incremental flows.
The irony, of course, is classic market theatre: one man’s tariff wall becomes another man’s defensive moat. While exporters negotiate tougher contracts abroad, telecom operators could quietly bask in renewed investor interest at home.
In short, the 25% tariff shock is not just about global trade politics—it is also about how capital seeks safety. For now, India’s exporters may groan, but telecom just might grin.
Vulnerable Sectors Under Pressure:
India’s export portfolio is heavily weighted toward labor-intensive, tariff-sensitive goods. Textiles and apparel (13% of India’s merchandise exports in 2024), gems and jewelry (11%), and chemicals and pharmaceuticals (15%) are particularly exposed.
A proposed 10–15% U.S. tariff could erode India’s cost advantage, especially as competitors like Vietnam, Bangladesh, and Turkey—already gaining U.S. market share—stand ready to capitalize. For instance, Vietnam’s textile exports to the U.S. grew 8% year-on-year in 2024, while India’s stagnated at 3%.
The IT hardware sector—laptops, servers, and electronic components—faces its own challenges. As the U.S. tightens its tech trade policies, India’s nascent electronics export growth (projected at $20 billion in 2025) could hit bottlenecks, compounding existing supply-chain disruptions from global chip shortages.
Telecom and IT Services: A Safe Haven:
Amid these headwinds, two sectors remain relatively insulated, offering stability for both investors and policymakers.
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Telecom: India’s telecom industry is anchored in its domestic market, shielding it from U.S. tariff impacts. With 5G rollout accelerating, average revenue per user (ARPU) climbing (Vodafone Idea’s ARPU rose 15% to Rs 177 in Q1 2025), and data consumption surging 20% annually, players like Bharti Airtel, Reliance Jio, and Vodafone Idea are insulated from trade disruptions. For Vodafone Idea, the real hurdle remains securing government relief on Adjusted Gross Revenue (AGR) dues and executing its Rs 50 billion debt raise, not navigating U.S. tariffs. Without AGR relief, not only will Vodafone Idea’s survival remain a question mark, but the government’s own equity investment in the company could also turn into sunk capital.
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IT Services: Giants like TCS, Infosys, and Wipro are equally resilient, thanks to their reliance on long-term service contracts and steady U.S. outsourcing demand. Tariffs on goods don’t directly affect these firms, and heightened cost pressures in the U.S. could even drive more outsourcing, providing a countercyclical boost. In 2024, India’s IT services exports grew 7% to $90 billion, underscoring their stability.
Together, telecom and IT services stand as defensive bastions for investors seeking refuge from global trade volatility.
Strategic Imperatives for Policymakers and Businesses:
The tariff threat underscores the need for India to diversify its export markets and reduce reliance on the U.S., which absorbed 18% of India’s exports in 2024. Emerging markets like Africa (Nigeria, Kenya), Latin America (Brazil, Mexico), and Southeast Asia (Indonesia, Malaysia) offer untapped potential, with trade agreements like the India-ASEAN FTA providing a foundation.
Simultaneously, India must climb the value chain in high-growth sectors like electronics, electric vehicle (EV) components, and green tech, where global demand is projected to grow 12–15% annually through 2030.
For businesses, the priority is resilience: hedging supply-chain risks, exploring alternative markets, and boosting domestic demand capture. Initiatives like India’s Production-Linked Incentive (PLI) scheme, which attracted $10 billion in investments for electronics in 2024, can support this structural shift.
Investment Implications:
Tariff-exposed sectors like textiles, gems, and low-end manufacturing face near-term valuation pressures, with potential share price declines of 5–10% if tariffs materialize. Conversely, telecom and IT services are likely to attract defensive capital, with firms like Airtel and TCS potentially seeing 8–12% upside in stable market conditions. Auto components and generic pharmaceuticals face mixed prospects, depending on tariff specifics—niche players with differentiated products may fare better than commoditized ones.
Final Take:
U.S. tariff threats are a wake-up call for India’s export strategy, exposing vulnerabilities but also illuminating pathways to resilience. Policymakers must accelerate market diversification and value-added manufacturing, while businesses need to pivot swiftly to mitigate risks. For investors, sector-specific tariff exposure is now a critical lens for decision-making.
The winners will be those who adapt fastest, leveraging innovation and strategic foresight to turn challenges into opportunities in a shifting global trade landscape.
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