How will Trump tariff impact India? The markets are fairly resilient and Bernstein believes that “India will be able to safely navigate through the tariff challenges. While on the one hand they are predicting a recovery of the macros in India, they do not rule out recession in US. The international brokerage is Underweight on sectors like IT as a result of their direct correlation with the overall trend in US.
They expect India “to engage with US through negotiations rather than heating up the trade war.” They expect a recovery of macro factors in the second half of the year and believe that a potential trade agreement with US as “a positive long-term development.”
Trump tariff: What happens to India
At the first glance, the 26% tariffs imposed on India seem rather high, higher than what India levies on most US items. “However, two of India’s high ticket exports – IT services and Pharmaceuticals, are untouched by this announcement, in line with our earlier view that healthcare is a sensitive sector and may not see material tariff threats,” stated the Bernstein report.
ALSO READImpact of Trump tariff likely to be limited says Motilal Oswal
Accordig to them, “the risk in some sectors across India arise from a weakening US economy, with recession a possibility. We upgrade healthcare to equal-weight, given its limited impact and downgrade IT to equal weight given the US recession risk rises in the wake of these measures.”
Tariff calculation method questionable
In his speech before the announcement, Trump mentioned being “nicer” to the countries than they have been to the US. This prompted speculations that the tariffs could be mild in nature or not broad-based. However, the sweeping across-the-board tariff rates are significantly high and far from anything ‘nice’.
The Bernstein report pointed out that the, “reference tariff rate used while calculating the tariffs is a rather complicated number that appears to include non-tariff measures like domestic taxes (strange, since it’s not differentiating to foreign goods) and currency manipulation.”
“This leads US to calculate 52% tariffs imposed by India on US goods (far higher than the actual tariff which is 10%), and halving this number to come up with 26% tariffs on India,” they explained.
ALSO READNilesh Shah on Trump Tariff, » Read More
