Global markets felt the tremors of US tariff threats on Friday as President Donald Trump signaled the possibility of further trade measures, putting India at the center of the discussion.

The Issue? India imposes a 9.5% tariff on US goods, while the US levies a much lower 3% on Indian imports. This imbalance has sparked concerns over potential reciprocal tariffs, which could significantly impact critical sectors like automobiles, pharmaceuticals, textiles, and steel.

Market Impact: FIIs Continue to Withdraw Funds

The uncertainty surrounding Trump’s trade policies has weighed heavily on Indian markets.

Market Reaction:

• The Nifty 50 index remains 14% below its peak.
• Small-cap stocks are stuck in bear market territory.

Foreign Investors Pulling Out:

• Foreign Institutional Investors (FIIs) have withdrawn over $15 billion in 2025.
• Foreign Portfolio Investors (FPIs) recorded an outflow of ₹24,753 crore as of March 7, pushing the total equity outflows in CY25 to ₹1,37,354 crore.

These figures highlight growing caution among global investors, reflecting uncertainty about trade tensions and India’s economic outlook.

Industries at Risk: Automobiles, Pharma, Textiles & Steel

Experts warn that India’s key industries could face severe challenges if reciprocal tariffs are imposed.

Ross Maxwell, Global Strategy Operations Lead at VT Markets:
"These industries are at a critical juncture. Any escalation in tariffs could disrupt global supply chains."

Potential Impact on Key Sectors:

Automobiles – US tariff hikes could increase car prices and disrupt exports.
Pharmaceuticals – India supplies 35% of US pharma imports, making it highly exposed to trade policy shifts.
Textiles – Higher tariffs could impact India's export competitiveness in the global apparel market.
Steel – Trump’s history of protective tariffs on metals raises concerns about Indian steel exports.

Possible Countermeasures?
Analysts at YES Securities suggest that India could reduce tariffs on US steel imports and encourage American firms like Tesla to enter the Indian market as a strategic move to ease trade tensions.

Are Trump’s Tariffs a Negotiation Tactic?

Despite the market turmoil, some experts believe Trump’s tariff threats are more about negotiation than permanent policy shifts.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services:
"Markets see Trump’s moves as short-term bargaining tactics rather than long-term tariffs. Sustained tariffs could hurt the US economy itself."

Interestingly, China and Germany have already launched domestic stimulus measures to cushion the impact of Trump’s policies, further complicating the global economic landscape.

Pharma Sector: A Mixed Outlook Amid Trade Tensions

Despite facing short-term risks, India’s pharmaceutical sector remains competitive compared to China, where US tariffs can go up to 20%.

Amisha Vora, Chairperson & MD of PL Group:
"Even with tariff concerns, India remains a stronger alternative to China. Large-cap pharma stocks like Sun Pharma and Lupin have seen some sell-offs, but they remain fundamentally strong."

Key Takeaway: Unless tariffs significantly escalate, India’s pharma sector should remain resilient in the long run.

Rupee Under Pressure & Market Volatility on the Rise

With the Indian Rupee weakening and foreign investments retreating, overall market volatility has increased.

Vinod Nair, Head of Research at Geojit Financial Services:
"Despite equity outflows, Indian markets have shown resilience compared to other emerging markets."

Amisha Vora (PL Group) offers a bullish take:
"India’s ongoing economic reforms and demographic advantage will help markets recover. We expect a short-term correction of around 4-5% before stability returns."

What Lies Ahead for India?

Key questions for the coming months:
Will Trump’s tariff threats turn into actual trade policies, or are they just negotiation tactics?
Can India navigate trade tensions through diplomatic efforts and tariff adjustments?
How will foreign investors respond in the long term—will they return once stability improves?

While trade tensions have created short-term uncertainty, India’s long-term market potential remains strong. The focus now shifts to diplomatic trade negotiations, government policies, and corporate earnings recovery to restore investor confidence.