The U.S. decision to reimpose wide-ranging tariffs has sent ripples across global trade, with India experiencing both immediate market reactions and a concerted government effort to mitigate the impact and forge a path forward.
On April 2, 2025, U.S. President signed Executive Order 14257, citing a “diplomatic emergency” to re-establish a broad tariff regime. This move introduced a baseline 10% tariff on nearly all imports, coupled with country-specific additional duties reaching as high as 26%. India was notably among the nations subjected to these higher duties.
While the baseline tariff came into effect on April 5, the country-specific duties followed quickly on April 9, triggering immediate global trade reactions and sending a clear signal of shifting international trade dynamics.
Immediate Impact on Indian Markets and Economy
The announcement had an immediate and palpable effect on Indian financial markets:
- Stock Market Reaction: The very day the tariffs were announced, the Nifty 50 plummeted by 743 points, and the Sensex shed over 2,200 points, reflecting significant investor apprehension.
- Foreign Portfolio Investment (FPI): Early June 2025 saw foreign investors withdraw over ₹8,749 crore from Indian equity markets. This outflow was primarily driven by increasing U.S. yield pressures and the overarching uncertainty created by the new tariffs.
- Metals Sector: The metals industry was particularly hit, with new U.S. tariffs on steel and aluminum reaching up to 50%. Shares of major companies like Tata Steel consequently saw drops of approximately 2.5% to 3%.
Sector-Wise Impact Breakdown
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Economic Trends in the Short to Medium Term
Despite the initial shock, India’s economic outlook shows a mix of resilience and strategic adjustments:
- GDP Growth Forecasts: The Indian government remains optimistic, maintaining its GDP forecast of 6.3–6.8% for 2025–26. However, some private forecasts have shown a slight downward revision to 6.1%, reflecting the new trade environment.
- Rupee and Foreign Investment: The Indian rupee has largely demonstrated stability. This has been aided by a softening trend in the U.S. dollar and anticipated rate cuts by the U.S. Federal Reserve. Furthermore, in May 2025, Foreign Portfolio Investors (FPIs) showed renewed confidence, investing ₹359.6 crore in equities and ₹159.4 crore in debt instruments.
Long-Term Strategy and Government Response
India has swiftly moved to implement a multi-pronged strategy to counter the tariff impact and build long-term economic resilience:
- Diplomatic Talks: A significant development was a four-day India-U.S. negotiation in June 2025, which reportedly made progress towards an interim trade agreement, particularly in the critical agriculture and automobile sectors.
- Policy and Legal Response: India is reportedly preparing to challenge the tariffs at the World Trade Organization (WTO). Concurrently, the government has activated export-support measures, including interest subsidies and credit schemes, to aid affected industries.
- Diversification Push: A key long-term strategy is India’s intensified effort to fast-track trade talks with major economies and blocs such as the EU, UK, Canada, ASEAN, UAE, and South Korea. This aims to reduce trade reliance on any single country, including the U.S.
- Make-in-India & PLI Benefits: Domestic manufacturing is receiving a significant boost through the Production-Linked Incentive (PLI) schemes. These schemes, particularly in electronics, semiconductors, and mobile manufacturing, have spurred increased domestic activity. Major global brands like Apple and HP are notably ramping up their production in India, signaling a strategic shift.
Conclusion
The renewed U.S. tariffs have undoubtedly presented India with a new set of economic challenges. However, the initial shock on markets and foreign investments is being met with a proactive and strategic response. While sectors like metals and auto face immediate pressure, industries such as pharmaceuticals and IT appear relatively insulated for now. The Indian government’s swift action in pursuing diplomatic solutions, implementing export support, and pushing for diversified trade relations, coupled with the “Make-in-India” initiative, positions the nation to not only weather this storm but also potentially emerge as a strengthened “China+1” hub in the global supply chain.