India gains over Asian EM peers; US recession may limit benefits

Sectoral Impacts

Analysts see no significant impact on large exporting sectors.

“For now, there is relief as no incremental adverse impact is expected on major exporting sectors such as IT services, pharmaceuticals, and automobiles,” says Trideep Bhattacharya, President & Chief Investment Officer, Equities, at Edelweiss Asset Management Limited (EAML).

He also believes the announced tariffs could provide India with a relative competitive advantage over its Asian peers.

Textiles

According to analysts, the high tariffs on Chinese and Bangladeshi exports create opportunities for Indian textile manufacturers to gain market share, attract relocated production, and increase exports to the US.

“India’s strong base in textile production, coupled with lower tariffs, could drive greater global demand and new investments in the sector,” says Ajay Srivastava of GTRI.

Electronics and Telecom

Srivastava further states that in the electronics, telecom, and smartphone sectors, countries like Vietnam and Thailand are likely to lose cost competitiveness due to steep US tariffs.

This could create an opportunity for India, which has already begun investing in electronics manufacturing through government incentives such as the Production-Linked Incentive (PLI) scheme.

However, while semiconductors remain exempt from tariffs, India is unlikely to benefit significantly, as the sector will continue to be dominated by technologically advanced players such as Taiwan.

Autos & Metals

Autos, auto parts, and steel and aluminium products are already subject to Section 232 tariffs at 25%, as per President Trump’s order on 26 March 2025, and are not covered under the reciprocal tariff regime.

Recession Fears

The Indian equity markets reacted negatively to the announcement, with the Nifty opening at 23,160, down from its previous close of 26,332, amid rising fears of a US recession.

Madhavi Arora of Emkay Global Financial Services highlights the increasing probability of a US recession.

“Higher tariffs will lead to a combination of lower US corporate profit margins and higher consumer prices, which could rise by more than 1.5%. The US economy may transition from its recent ‘goldilocks’ phase to stagflation in the coming quarters, potentially leading to a disinflationary impulse due to permanently lower output,” she explains, adding that this effect could unfold over the next year.