'Mixed bag' for India with tariff of 27%

Following Trump's announcement, markets around the world sank on Thursday, amid concerns about the rising costs for businesses and households.

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FOLLOWING TRUMP'S announcement, markets around the world sank on Thursday, amid concerns about the rising costs for businesses and households. In a sign that a trade war has begun, both the European Union and China on Thursday pledged to retaliate against Trump's move, while several other countries, including Japan and Australia hinted at adverse responses.

For India, the reciprocal tariff, though much higher than anticipated given its current tariff levels, wasn't upsetting, as in relative terms, it is better placed as against a few key competitors in US markets, including China, Vietnam, Bangladesh. If the US tariffs persist, India could also hope for gains from the changing supply chain dynamics, especially in sectors like auto parts and electronics. A waiver for the pharmaceutical products from the additional tariff is also seen as a positive for the country, which caters to nearly half of the US market for branded generic medicines.

Among India's industrial sectors, textiles & garments and electronics may see a relative advantage in the US markets, but it is unclear if the overall trade volumes for even these sectors would shrink. The price elasticity of Indian exports will hold the key.