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Tata stocks may take a beating over Donald Trump's protectionism talk

A possible US-EU trade war could hurt Tata firms as the US and Europe account for 45% of the group's auto, steel, chemical, and beverage business

Krishna Kant  |  Mumbai 

Tata group companies

The could be affected the most among Indian business houses in the eventuality of a between the US and the

The group, through companies such as Tata Steel, Tata Motors, and Tata Global Beverages, has manufacturing operations on both sides of the Atlantic Ocean. Any and reciprocal tariffs on each others’ exports will hit revenue and profitability for the group plants in the US and the EU.

Among companies, is likely to take the biggest hit, followed by Tata Steel, Tata Chemicals, and In 2016-17, the US was the second-largest market for Tata Motors’ subsidiary vehicles, behind its home market in the UK.

The US accounted for nearly a fifth of JLR’s global revenue and 17.2 per cent of Tata Motors’ consolidated revenue. is the group’s largest company, accounting for nearly 45 per cent of the group’s revenue last fiscal year.

Not surprisingly, stocks with large global operations were among the worst hit on the bourses on Monday. was the biggest loser among index heavyweights, losing 5 per cent in Monday’s trades.

and followed closely and were down nearly 3 per cent each. Tata Global Beverages, however, bucked the trend and closed flat, thanks to a recovery in the last hour of trade.

had announced plans to levy tariffs on steel and aluminium imports in the country. The EU responded by threatening to impose its own duty on US imports in member countries.

Trump upped the ante by threatening to impose duty on passenger car imports from the EU.

This has created the spectre of a US-EU trade war, hurting revenues and profits of manufacturers trading between the two trading zones.

“It is too premature to comment on these issues at this time,” said a spokesperson.

Economists are, however, worried about the impact on consumer demand and corporate investments.

“Though it is early to quantify the exact economic impact of higher import tariffs in the US and the EU, protectionism almost always leads to a decline in exports (on net basis) of the target country,” said Devendra Pant, chief economist at India Ratings.


Tariffs also raise input costs for manufacturers, hitting consumer demand and lowering capacity utilisation, which, in turn, force companies to either cut back on fresh investments or delay expansion. In the longer term, everyone is a loser through lower trade, investment and economic growth, Pant added.

Tata Motors’ British subsidiary JLR is Britain’s largest passenger carmaker and one of the top luxury carmakers globally. If Trump raises duties on passenger car imports from the EU, JLR will be adversely affected, as it has no manufacturing operations in the US.

Tata Steel, on the other hand, is one of Europe’s top steelmakers, with manufacturing operations in the UK and the Netherlands. Incidentally, EU is the largest exporter of steel to the US, which will now become expensive after Trump’s decision to impose tariffs on steel and aluminium imports.

Tata Steel’s European operations accounted for 36 per cent of its global consolidated revenue in 2016-17.

The rise in protectionism would also hit Tata Chemicals, which is now the world’s third-largest soda ash maker, with manufacturing operations in both the US and the EU.

Tata Chemicals’ North America is the second-largest manufacturing operations for the company in value terms, after its Indian operations, accounting for nearly a quarter of consolidated revenue.

Analysts also see a negative impact for Tata Global Beverages, which has an extensive tea and coffee beverage operations in the EU, the UK and the US.

“Trade protectionism is always bad for consumer companies, as tariff barriers are inflationary in nature and raise the cost of operations for companies. The end result is a decline in consumer demand,” said G Chokkalingam, managing director, Equinomics Research.

In 2016-17, the non-India business – largely North America, the UK and the EU - accounted for nearly 60 per cent of Tata Global Beverages’ consolidated revenues.


*As on March 5, 2018; **Consolidated global revenues; YTD: Year-to-date Sources: Exchange, Companies, Capitaline

First Published: Tue, March 06 2018. 07:00 IST