Stocks in the Nifty Auto index, like Balkrishna Industries, Bharat Forge, Bajaj Auto, Tata Motors, and Motherson, dropped by up to 4% on Thursday. This happened after the Trump administration announced a large 26% tariff on imports from India. Experts say this is a big blow for India’s exporting industries, especially cars and auto parts.
The auto sector sends about 3% of its total exports to the U.S., and this new tax will likely reduce demand for Indian cars in America. It can also lead to higher production costs, job losses, and problems in the supply chain. Macquarie, a financial firm, predicts these tariffs could cut India’s economy growth by up to half a percentage point.
Currently, auto parts sent from India to the U.S. make up one-third of the total $21.2 billion in industry exports. However, India only holds a 2% share of the U.S. auto parts market, compared to Mexico’s 39%, Canada’s 13%, and China’s 12%. Companies like Sona BLW Precision Forgings, which gets 40% of its revenue from the U.S., and Bharat Forge and Motherson Group, which get around 30% and 18% respectively, could be heavily affected.
When the news broke, Indian markets reacted quickly, with the BSE Sensex dropping over 500 points and the Nifty50 going down below 23,200 in just the first 15 minutes of trading. The new 26% tariff for Indian goods is higher than the 20% for the European Union, 24% for Japan, and 25% for South Korea. China has the highest tariff at 54%. Experts view India’s entry into this high-tariff category as a serious problem for trade with the U.S.
Meanwhile, New Delhi is talking with Washington to reach a deal that might reduce the economic impact and offer better trade conditions for the affected industries.
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