Expected 10%, Received 26% Tariffs: 'Shock' Says Ajay Bagga; Lists 3 Sectors That May Be Hit

The US has imposed a 26% tariff on Indian exports, impacting key sectors like textiles, engineering goods, electronics, and automobile components. Pharma and copper exports remain exempt for now, but the pressure on Indian businesses is significant.

Market expert Ajay Bagga explains, "With Indian exports to the US at $80 billion, either US consumers pay more, Indian companies absorb the hit, or distribution margins are reduced."

India Faces Tariff Shock

US retailers and factories anticipated these tariffs and began stockpiling Indian goods in November. "The immediate impact will be delayed, but once the existing inventory runs out, the effects will be felt," Bagga notes.

The tariffs, effective from April 9, leave no room for negotiation, creating uncertainty in the market.

The global market has already reacted negatively to the announcement. "Indian futures dropped 1.5%, Japan fell 4%, and Vietnam’s ETF saw a 10% decline in US trading. With its $18 trillion economy, China is managing the impact better," he observes.

Indian markets are expected to decline by 1.5% to 2%, though strong domestic consumption could provide some relief.

A major concern is the disruption in foreign investor flows. "We expected FPIs to return by May-June, but this could now be delayed by a few months," Bagga says. "Negotiations to lower the tariff to 10% may take six to twelve months. Meanwhile, exporters will struggle."

3 Sectors That May Be Hit

Despite the challenges, India remains relatively competitive. "Bangladesh faces 37% tariffs, Vietnam 46%, and China 34% plus additional duties. We are still in a better position than others," Bagga explains.

However, industries like pharmaceuticals, which export $8 billion worth of products to the US, could face increased competition. "It’s self-defeating for the US to impose tariffs on Indian pharma, but they are looking at alternatives like Ireland, Switzerland, and Germany."

The way forward for Indian companies lies in adaptation. "Businesses must find new markets, improve efficiency, and move up the value chain to justify higher prices," says Bagga.

However, such transformations take time. "We expected a 10% tariff, but 26% came as a shock. Companies across textiles, electronics, and pharma must rethink their strategies."

While the short-term outlook appears challenging, India's strong domestic economy and resilience in global trade may help mitigate some of the adverse effects. "The immediate future is uncertain, but Indian businesses will need to adapt quickly to survive and remain competitive in the global market," Bagga concludes.

U.S. President Donald Trump said on Thursday that 25% duties on imports from Canada and Mexico will come into effect on March 4 - not April 2 as he had suggested a day earlier - and said goods from China will be subject to an additional 10% duty. This week he also floated 25% tariffs on shipments from the European Union.