US Tariffs On Indian Goods Shake Markets, Export Sectors Face Harsh Blow
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Markets kicked off Thursday’s session in the red after the 50% US tariffs on Indian goods took effect, heightening trade tensions between the two countries. The Sensex slipped 408 points to 80,378, while the Nifty fell 125 points to 24,586 in early trade, with volatility expected due to the monthly derivatives expiry. Export-reliant sectors like textiles, gems, jewellery, and leather came under pressure, while pharma, steel, and electronics offered some cushion owing to exemptions from the fresh duties.
A Stormy Start: The US Tariff Effect
A sharp sell-off hit Indian markets on Thursday morning as a new 50 per cent US tariff on Indian goods became effective. The Sensex began the day at 80,754.66, down from its previous close of 80,786.54, while the Nifty 50 opened at 24,711.50 against its 24,712.05 close. By 9.55 am, both indices had shed over 0.5 per cent, with the Nifty trading at 24,586.80 and the Sensex at 80,378.10. The downturn was widely anticipated, with the Gift Nifty already signalling a steep gap-down opening. The market's heightened sensitivity was compounded by the monthly derivatives expiry, a situation that Hariprasad K, a SEBI-registered Research Analyst, believed would make "volatility almost inevitable." The India VIX had already spiked to 12.2 on Tuesday, a clear indication of choppy waters ahead.
Export-dependent industries are the hardest hit, with the US tariffs pushing India’s effective export rate to 34%, one of the highest globally.
“India faces one of the harshest tariff regimes in the world. India’s effective rate on exports to the US jumps to 34 per cent - second only to China & far above ASEAN’s 16 per cent,” said Vikram Kasat, Head-Advisory at PL Capital.
Sectors facing immediate pressure include:
The Human Cost: Job Losses and Economic Strain The long-term repercussions could include significant job losses. India's export sector relies heavily on cheap labour, and with reduced demand from the US, manufacturers will produce fewer goods, leading to layoffs. This decline in employment could, in turn, reduce domestic spending power. "All of this will definitely mean losses for traders, and compound the existing employment problem."
Impact on Indian Consumers: Will Goods Become Cheaper?
With exports to the US less profitable, the question arises—will goods like textiles, gems, or leather shoes become cheaper for Indian buyers?
On the surface, surplus supply could lower domestic prices, but experts argue otherwise:
Export quality vs local demand: Many export goods are produced to US standards, often superior in quality, making them less suited for Indian price points.
Profit margins: Exporters earn in dollars, which boosts profitability. Selling domestically reduces margins significantly.
Market absorption: India’s spending power may not absorb all surplus goods. Larger exporters will seek new global markets, while smaller players might offload in India at reduced rates.
A Stormy Start: The US Tariff Effect
A sharp sell-off hit Indian markets on Thursday morning as a new 50 per cent US tariff on Indian goods became effective. The Sensex began the day at 80,754.66, down from its previous close of 80,786.54, while the Nifty 50 opened at 24,711.50 against its 24,712.05 close. By 9.55 am, both indices had shed over 0.5 per cent, with the Nifty trading at 24,586.80 and the Sensex at 80,378.10. The downturn was widely anticipated, with the Gift Nifty already signalling a steep gap-down opening. The market's heightened sensitivity was compounded by the monthly derivatives expiry, a situation that Hariprasad K, a SEBI-registered Research Analyst, believed would make "volatility almost inevitable." The India VIX had already spiked to 12.2 on Tuesday, a clear indication of choppy waters ahead.Export Sectors Under Pressure
Export-dependent industries are the hardest hit, with the US tariffs pushing India’s effective export rate to 34%, one of the highest globally.
“India faces one of the harshest tariff regimes in the world. India’s effective rate on exports to the US jumps to 34 per cent - second only to China & far above ASEAN’s 16 per cent,” said Vikram Kasat, Head-Advisory at PL Capital.
Sectors facing immediate pressure include:
- Textiles & apparel
- Jewellery & gems
- Leather & footwear
- Seafood & shrimps
The Human Cost: Job Losses and Economic Strain The long-term repercussions could include significant job losses. India's export sector relies heavily on cheap labour, and with reduced demand from the US, manufacturers will produce fewer goods, leading to layoffs. This decline in employment could, in turn, reduce domestic spending power. "All of this will definitely mean losses for traders, and compound the existing employment problem."
Impact on Indian Consumers: Will Goods Become Cheaper?
With exports to the US less profitable, the question arises—will goods like textiles, gems, or leather shoes become cheaper for Indian buyers? On the surface, surplus supply could lower domestic prices, but experts argue otherwise:
Export quality vs local demand: Many export goods are produced to US standards, often superior in quality, making them less suited for Indian price points.
Profit margins: Exporters earn in dollars, which boosts profitability. Selling domestically reduces margins significantly.
Market absorption: India’s spending power may not absorb all surplus goods. Larger exporters will seek new global markets, while smaller players might offload in India at reduced rates.
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