Trump’s tariffs risk igniting trade wars, threatening global economic stability. Christine Lagarde warns that such policies harm all nations, reducing GDP and disrupting trade. S&P Global highlights no winners in tariff conflicts, often leading to export declines and slower global growth. This turmoil could significantly impact India’s economy and stock market as global demand weakens.

India’s Limited Export Dependence

India is less export-reliant than other Asian economies, offering some insulation from Trump’s tariffs. However, a global slowdown could reduce demand for Indian exports, particularly to the US, its largest trade partner. Sectors like textiles, electronics, and engineering goods may face challenges, impacting investor sentiment and stock performance in these industries.

Stock Market Impacts: Export and IT Sectors at Risk

Export-driven sectors, including IT and pharma, could experience pressure from weaker US demand. Pharma firms face pricing challenges, while IT companies could see slower deal closures. A stronger US dollar may benefit export revenues but increase costs for firms with dollar-denominated debt. These factors could create significant volatility in Indian stock markets.

US Trade Relationship: A Key for India

The US is India’s largest trade partner, with bilateral trade surpassing $120 billion. India enjoys a trade surplus, supported by a diverse export portfolio across textiles, engineering, and electronics. However, disruptions in US trade policies could weaken India’s export growth and hurt sectors reliant on American demand, affecting overall market performance.

Global Risks to Indian Markets

A global slowdown would reduce demand for Indian exports and disrupt supply chains reliant on Chinese inputs. This could pressure margins for Indian manufacturers. Tightening financial conditions from rising US inflation and interest rates might further impact sectors reliant on low borrowing costs, adding to market challenges.

Also Read: Trump 2.0: Impact of New US Policies on India’s Economy

Navigating Volatility and Opportunities

Trump’s policies may lead to volatile Indian markets, with FIIs possibly withdrawing funds amid global uncertainty. Domestic-focused sectors like consumer goods may outperform export-driven industries. Additionally, India could attract global supply chains shifting away from China, presenting opportunities for manufacturing growth. Strengthening ties with the US remains critical to mitigating risks.

Conclusion: Stay Watchful in Uncertain Times

India’s stock market faces potential pressures from Trump’s tariff hikes, though limited export dependence provides some protection. Investors should track global trade developments and focus on resilient sectors like domestic consumption. India’s ability to capitalise on opportunities like supply chain diversification could determine its resilience in this evolving economic landscape.