India Inc bonds resilient amid record trade costs from US tariffs: Barclays

Barclays says Indian corporates will face margin compression but remain supported by strong leverage, liquidity and domestic demand as US tariffs hit $55 bn exports

Indian corporate credits are expected to weather the latest tariff escalation from Washington, even as US import duties on Indian goods soar to unprecedented levels, Barclays Research said in a note on Wednesday.

 

The trade-weighted tariff rate on Indian exports will jump to 35.7 per cent from 20.6 per cent currently and 2.7 per cent at the start of 2025, once the combined 50 per cent levies take effect on August 27, the firm said. By contrast, India’s tariffs on US imports remain at 9.4 per cent, leaving the bilateral imbalance at its widest in decades. 

 

Barclays estimates about $55 billion of Indian exports, nearly 70 per cent of shipments to the US, are now directly at risk. Electrical machinery, gems and jewellery, apparel and machinery face the steepest hikes, while smartphones, petroleum products and pharmaceuticals remain temporarily exempt.

 

Despite the export shock, the impact on corporate debt is expected to be contained.

 

“High grade credits could see some knee-jerk spread widening, but strong corporate fundamentals and domestic funding access should limit lasting damage,” Barclays analysts wrote. 

 

Company exposure is uneven. Biocon Biologics, with 44 per cent of its revenue from the US, faces moderate-to-high risk if pharmaceutical tariffs rise toward the 200 per cent ceiling signalled by US President Donald Trump.

 

JSW Steel’s US plants are vulnerable to margin pressure, while Tata Steel has limited exposure. Vedanta Resources earns less than 2 per cent of its revenue from America, leaving its earnings more tied to commodity prices. UPL Corp. may benefit if tariffs on Chinese agro-chemicals improve its relative pricing in North America.