US tariff move on India: What Axis Bank and leading brokerages say

Trump's 26% tariff on India rattles sectors from IT to autos; brokerages flag risks to growth, trade talks, and policy outlook

The US President Donald Trump on Wednesday imposed a 26 per cent reciprocal tariff on India and even higher duties on dozens of other countries. The sweeping global tariffs are expected to upend global trends and adversely impact several domestic sectors, from information technology to automobiles. Here are key takes from leading brokerages: 

Nomura: We think this is a clear risk-negative event for Asian stocks, and we do not see it as a market “clearing event,” which some market participants were hoping for. The repercussions of tariffs will likely be felt on the US inflation and growth outlook over the next few weeks and months, when we think investors will intensely scrutinise core US hard data such as payrolls/employment, inflation, and consumer spending/retail sales to assess the health of the US economy. Any softening of data will likely increase market concerns of a US recession/stagflation, which will likely weigh further on risk sentiment in general, including on Asian stocks.

 

HSBC: India received a hefty 26 per cent reciprocal tariff, which arithmetically may shave off up to 50 basis points (bps) from growth this year. However, given that pharmaceuticals, a key Indian export to the US, were largely exempted from the reciprocal tariff, the impact could have been larger. We also note that India is currently in the process of negotiating its first tranche of an eventual free trade agreement (FTA) with the US and can offer concessions such as purchasing more US oil and defence goods (at the expense of Russia), as well as lowering tariffs on agricultural products and electric vehicles. From a positive perspective, trade risks may provide the catalyst for India’s much-needed reforms, including slashing tariffs, hastening trade agreements, opening up to regional foreign direct investment, and making the rupee more market determined. 

Axis Bank: Reciprocal tariffs announced are much higher than and different from MFN rates, and above market expectations. At 50 per cent of the US estimate of effective tariffs (likely calculated basis trade balance) leaves room for upward (retaliation) or April 03, 2025 Global TradeTrade Wars downward (negotiation) revisions. Second order effects are most likely from China (FX, dumping in other markets, more policy support), which is among the worst affected. The US can use windfall from duties it collects to ease short term pains. This is only the start of the end of multilateralism and a period of uncertainty that will affect investments globally as well as risk premia in financial markets.

 

Macquaire: Our primary reading is that in case the 26 per cent tariffs suggested by the White House is a blanket tariff applied across all India products, it could be pretty negative. This is much worse than what we had anticipated. As per our global strategist, it seems likely that US effective tariffs, even after negotiations, are likely to rise to about 20-25% (vs about 3% in 2023). This is a far worse outcome than our strategist was expecting in 2025 preview (about 8%). India is also in the process of negotiating a bilateral trade agreement (BTA) with US. So we will have to closely watch and see where eventual tariffs settle... Nevertheless, there is downside risk to the GDP projection of 6.7 per cent by RBI for FY26E vs. FY25E GDP at 6.5 per cent coming from trade wars.

 

Kotak Institutional: The higher-than-expected reciprocal tariffs and related increased uncertainty with respect to (1) global growth and inflation, and (2) earnings of companies should logically lead to a more cautious investment environment. We have long argued for a higher cost of equity and lower multiples to factor in (1) the increased global geopolitical and macroeconomic uncertainty, and (2) the sector-specific and company-specific disruption risks. The high valuations of the Indian market and of most sectors and stocks would suggest that the market has largely ignored the potential risks.

 

Some see a silver lining, easier rate cut cycle:

 

Jefferies: Reciprocal tariff announcements come across as a relief, as there is no incremental adverse impact on large exporting sectors like information technology services, pharmaceuticals, and automobiles. Also, the 27 per cent tariff on India is looking reasonable from a relative perspective. Bigger worries are on a weaker US economic outlook, which is a negative for information technology services and other exporters. Incrementally, we would look to buy the dip, especially on pharmaceuticals. The key risk to this view is a prolonged global risk-off.

 

Morgan Stanley: We see downside risk of 30-60bps to our growth estimate of 6.5 per cent for FY26. Monetary policy will remain supportive of growth, we expect a change in stance to accommodative and 25bps rate cut in April policy....Further, on the back of downside risks to growth we see risk of a deeper rate easing cycle, with additional rate cuts of 50-75ps (vs base case of 75bps rate cut) as the RBI will likely need to support domestic demand. In case of pronounced downside risks to growth, we expect policy makers to pause fiscal consolidation and increase capex spending to support domestic demand.

 

Barclays: The higher-than-expected tariffs reinforce our view of three more rate cuts from the Reserve Bank of India (RBI), to a terminal rate of 5.50 per cent. India's domestic orientation may offset some of the pressure from large reciprocal tariffs, while the possibility of a bilateral trade agreement suggests tariffs may eventually be reduced for the economy. However, ultimately weaker global growth and the downside effects of US tariffs on exports — even if temporary — suggest the RBI will likely remain on an easing track. Growth and inflation outcomes being lower than the RBI's estimated trajectory mean a rate cut at the meeting next week is likely a done deal.