India Stands Strong Against US Tariffs—Yet Steel and Chemicals Face Challenges

India's modest exposure to US tariffs provides a buffer against direct economic shocks, but the ripple effects of trade diversion would test certain sectors such as steel and chemicals, S&P Global Ratings said. With exports to the US representing just 2.3% of its GDP, India's economy is mostly insulated from the immediate effects of retaliatory tariffs declared by US President Donald Trump. Yet, the secondary effects, such as excess material being diverted to India, might dilute prices and profitability within these industries.

S&P notes that India's strong domestic demand and infrastructure-led growth offer resiliency. Indian companies as a whole are positioned to withstand short-term slowdowns in earnings. But segments such as chemicals and steel continue to be vulnerable to global supply changes induced by US trade policies.

Other rating agencies are of the same opinion. Moody's points to the possible disruption in business services and automotive as well as steel and chemicals. Fitch, however, highlights India's minimal dependence on external demand as a counterweight.

Though India is insulated relatively from immediate tariff effects, the inter-connectedness of world trade implies caution in order to negotiate possible sectoral difficulties.

Sources: Economic Times, Business Today, Deccan Herald