You must have heard all over the news channels, Twitter and every other social media platform that there is a “Trade War” going on between China and America. During the second presidency of Donald Trump, he announced a series of steep tariffs on almost all goods imported to the US by other countries. The US trade weighted-average tariff rose from 2% to 24% from January to April 2025, the highest level in over a century. Let’s understand Trump’s tariff and their implications in this blog!
What Tariffs Were Introduced?
The reciprocal tariffs were determined based on country-specific tariff and non-tariff barriers imposed on the US by other countries such as customs barriers, licensing restrictions, trademark regimes, patents, copyright regulations, etc.
On April 2nd 2025, US President Donald J. Trump signed an Executive Order imposing a minimum of 10% on all US imports and higher tariffs on 57 different countries ranging from 11% to 50% effective from April 5, 2025, calling it reciprocal tariffs. But later, on April 9, 2025, Trump suspended this policy for 90 days for all countries except China. But a 10% tariff is still in effect.
Why Trump is imposing tariffs?
- Unfair trade practices: The intention behind these tariffs according to Trump is to end unfair trade practices. Trump administration justifies these tariffs as a response to taxes and other non-trade barriers imposed on American goods by other countries.
- Boost manufacturing activities and economic independence: Trump believes that imposing tariffs on other countries will boost domestic manufacturing by forcing firms to start production in the US which helps to create jobs in America and will bring economic independence to the country but many economists believe that this may have negative consequences including reducing slowdown in global trade, higher prices for consumers and loss of competitiveness of American businesses.
- Bring Trade deficit to ‘zero’: According to Trump, America is being cheated by every country with which the country has a trade deficit. These trade imbalances in the US are caused by tariff and non-tariff barriers. Therefore, US officials calculated the tariff in a way such that the bilateral deficit between the two nations was cut down to zero.
Impact on Global Trade & Economy
You must have heard about this statement that when the US sneezes, the whole world catches cold. Trump knows that tariffs are one of the key tools in global trade battles.
- Recessionary risk in US: He sent a shockwave through the financial market and global trading system with his announcement of reciprocal tariffs. His policy enforces a 10% tariff while imposing 20%-34% import tax rates on 60 different nations including China and Europe. Many economists suggest that these policies might push the American economy into recession.
- Global Inflation and slowdown: According to JP Morgan’s analysis for 2025, American and global consumers will experience a 2% increase in inflation due to the tariffs imposed, hurting consumer purchasing power and spending leading to a slowdown in economic growth.
- Chances of trade war: The main trading partners of the US such as China and Europe showed retaliatory tariff policies could lead to a trade war.
- Global market uncertainties: This 90-day pause brings global market uncertainties because instead of introducing widespread tariffs, the government might choose to impose strategic measures.
- Global supply chains disruption: New tariffs may disrupt global business operations. Especially the companies heavily dependent on imports may face significant operational challenges as businesses will need to navigate increased raw material costs and potential delays leading to disruption of global supply chains.
Sector-wise Breakdown: Winners & Losers – Stocks / markets that benefit vs. those that suffer.
Winners:
- IT sector – According to many analysts, the IT sector is least likely to be directly impacted by Trump’s tariff policies. Companies like Tech Mahindra are expected to perform better in this environment.
- Pharmaceuticals – Predictions for the pharma industry are that this sector has been largely unaffected by new tariff policies. Trump exempted pharmaceutical products from his reciprocal tariffs. This provides relief to many Indian drug exporters such as Lupin, Dr Reddy’s Laboratories and Zydus. This sector may even gain significant exposure to the US market.
Losers:
1. Automobiles and Auto Component Sectors – Indian exporters in automobile sectors are likely to be highly affected by these reciprocal tariffs. Trump imposed a 25% tariff on US auto exports. Key players with substantial reliance on the US for their revenue are facing pressure:
Samvardhana Motherson is less likely to be affected as its manufacturing footprint is all over the world reducing tariff-related risks.
2. Chemical Sector – Trump imposed a 27% tariff on Indian specialty chemical products significantly impacting chemical exporting firms in the US market. Earnings could impact substantially negatively in the short term while long-term growth prospects remain intact. Companies with US exposure:
- Textile Sector – The US is a key market for the Indian textile and apparel industry and is likely to face a worst hit and challenges due to Trump’s newly imposed tariffs. This could hurt the competitiveness of Indian companies such as Welspun Living, Trident, Himatsingka Seide, Indo Count Industries, Vardhman Textiles and KPR Mills.
- Solar & Electronic Manufacturing Sector – Trump levied a 27% tariff on Solar imports on top of existing import duties increasing a significant cost burden for domestic exporters like Waaree whose approx. 54% of total revenue is linked to the US market. Given lower exposure to the US market, electronics manufacturers such as Kaynes with 2-3% exposure, Syrma (with 4% exposure) and Dixon (nearly 5% exposure) are expected to be affected to a lesser extent compared to solar manufacturers.
How Should Investors React?
Stock market performance before the tariff announcement and after the announcement as of 7th April 2025:
This stock market crash was so bad that people called it “Black Monday” leading to approx. ₹ 19 lakh crore worth of market value wiped out from Indian markets.
As an investor, what should you do in this highly volatile market? – Your Investment strategies amid US tariffs should focus on reducing risk, maintaining a stable income and diversifying your portfolio among different asset classes such as:
- Government bonds: These are considered to be the safest asset class as these securities are issued by the Government of India.
- Gold: Gold is used by investors to hedge themselves from equity market volatility.
- Asset Leasing: Renting or leasing tangible assets like property, vehicles etc. allows investors to earn a stable passive income, often higher than traditional bank FDs.
- Corporate FDs: Corporations offer unsecured FDs to raise capital from the public. This asset class offers higher interest on FDs compared to traditional bank FDs.
- Peer-to-peer (P2P) lending: It is a digital platform that offers services to connect borrowers directly to the investors eliminating traditional financial institutions. This also allows investors to earn higher income compared to conventional fixed-income options.
Conclusion
Trump’s tariff hikes are sending ripples across global markets, demanding a sharper focus on investment strategies. Amid this uncertainty, Jarvis Artificial Intelligence can help identify stocks with high potential. Partnering with the best share market advisor in India ensures expert guidance through portfolio advisory services tailored to your goals. As US tariffs reshape trade flows, strategic positioning becomes vital. Focus on the best sectors for investment in 2025 such as technology, manufacturing, and energy to stay ahead. Navigate global volatility with informed decisions and future-ready insights.
