Steel, pharma, chemicals: Top Indian sectors at risk of higher US tariffs

The imposition of reciprocal tariffs by US President Donald Trump could end up hurting emerging Asia such as India, China and Thailand more than developed Asian economies (Hong Kong, Singapore), according to a note by Nomura.

India (9.5 per cent weighted average effective tariff on US exports to India versus a 3 per cent tariff rate on India’s exports to the US), Thailand (6.2 per cent versus 0.9 per cent) and China (7.1 per cent versus 2.9 per cent), Nomura said, have much higher effective tariff rates on the US.

On the other hand, countries that have free trade agreements with the US, such as Singapore and South Korea, are safer with respect to Trump’s reciprocal tariff threat, wrote Nomura analysts in a recent note.


Within the Asian economies, India stands out as having much higher relative tariff rates, analysts believe, and thus is exposed to reciprocal tariffs.

The US accounts for around 18 per cent of India’s total exports (around 2.2 per cent of gross domestic product, as of fiscal 2023-34, i.e. FY24) and is India’s largest export destination, with the India-US trade surplus rising in recent years to a high of nearly $38 billion in 2024.

“Key exports include electrical/industrial machinery, gems & jewellery, pharmaceuticals, fuels, iron & steel, textiles, vehicles, apparels, and chemicals, among others, of which iron & steel and aluminium account for nearly 5.5 per cent of the total,” wrote analysts at Nomura led by Sonal Varma, their chief economist.

Stock markets react to Trump tariff threat

On their part, equity markets back home have been cognizant of these developments - along with tepid corporate earnings growth for the December 2024 quarter (Q3FY25) - and have been volatile with a negative bias for most part of calendar year 2025 (CY25).

The Nifty 50 index has slipped over 1 per cent this far in CY25, with the Nifty Midcap 100 and Nifty Smallcap 100 indices losing over 8 per cent and 11 per cent, respectively during this period.

Events in recent days, according to Christopher Wood, global head of equity strategy at Jefferies, have confirmed that what might be termed as Donald Trump’s tariff tantrums are primarily a negotiating tactic.

“The ten percentage point hike in US tariffs on imports from China, implemented on Tuesday, looks relatively modest compared with the 60 per cent threatened during the election campaign. I continue to believe that the obvious way for China to counter this tariff threat is to offer to set up production in America thereby delivering another “win” for the 47th American president," Wood said.

For investors, analysts say, the consequences are clear and they must brace for extreme volatility, which is now inevitable.

The markets, according to Nigel Green, chief executive officer of deVere Group - a global consulting firm that has nearly $12 billion worth of assets under management (AUM), will be thrown into a whirlwind of erratic policy shifts, triggering violent swings across stocks, currencies, and bonds.

“The risk of a broader global slowdown is rising, as businesses delay investments amid uncertainty, and consumer sentiment weakens. We are entering a period where political unpredictability will directly impact market movements. Trump’s tariffs are just the beginning—this administration will continue weaponizing trade, making it a high-stakes game for investors,” Green cautioned.