Crisil and SBI Research list sectors likely to be impacted by Trumps tariff

Kolkata: Rating agency Crisil has come out with a list of sectors that will be adversely impacted by the retaliatory tariffs imposed by US President Donald Trump on India -- two layers of 25% adding up to 50% on goods imported from India. Revenue of companies in diverse sectors such as shrimp, home textiles, diamond polishing and carpets are likely to be impacted, Crisil has said in a credit alert.

In a note a few days ago, SBI Research, which is the thinktank of State bank of India also listed the sectors that will be affected. These are electronics, gems and jewellery, pharmaceuticals and nuclear reactor and machinery. According to SBI Research, these sectors account for 49% of India's exports to the US.

Crisil has said that the degree of impact will depend on the ability of the industry to pass on the additional costs to the customers and tariff slapped on these sectors in competing nations.

"Additional 25 per cent tariff to make exports to US unviable for India Inc," the rating agency said. Other sectors that are likely to be impacted include ready-made garments, chemicals, agrochemicals, capital goods and solar panel manufacturing.

Commenting on the pharmaceutical sector, SBI Research said, "India has been a comerstone of global supply chain for affordable, high-quality and availability of essential medicines, particularly life saving oncology drugs, antibiotics, and chronic dieses treatments. In generic drug market, India supplies nearly 47% of the pharmaceutical needs of the US. If US shift manufacturing and API production to other countries or domestic facilities, which will take minimum 3-5 years for meaningful capacity. So, tariff may lead to drug shortages and price increase for American citizens." The situation has been worse from the point when SBI economists made the statement since the tariff was 25% at that time and Trump slapped another 25% later.

Like Crisil, SBI Research has also mentioned the solar industry. "India has been an emerging supplier to US solar Industry, as US restricts Chinese products," SBI Research report had said.

Diamond polishing, shrimp and home textiles are all labour intensive sectors. These sectors are substantially dependent on exports to the US and, therefore, sales might be hit. Earnings could be affected since the tariffs have to be partially absorbed. Diamonds polished from India are also exported in the US, so much so that diamonds exported to this destination constitute 25% of the revenue of polishing firms.

Shrimp exporters could be majorly hit since about 50% of their revenue comes from exports to the US. Crisil said Ecuador is a competitor in shrimp exports and their products could become more cost effective for the US consumers.

Crisil has said that the most important front to watch out for is what emerges from the bilateral trade deal that is being negotiated between India and the US. Significantly, Donald Trump stated that the deal negotiations will be kept suspended till the tariff disputes is resolved. The new US tariff will come into effect on August 27. India has described the tariff as "unfair, unjustified and unreasonable" and that it would take the required measures to protect national interests.