Indian shares are set to open lower on Thursday after U.S. President Donald Trump threatened a 25% tariff on goods imported from the country starting August 1 and an unspecified penalty.
The 25% figure would single out India more severely than other major trading partners, and threaten to unravel months of talks between the two countries.
After announcing the tariffs, Trump said the U.S. is still negotiating with India on trade.
The Gift Nifty futures were trading at 24,685 points as of 7:58 a.m. IST, indicating that the Nifty 50 will open about 0.7% lower than its previous close of 24,855.05.
“Despite the unpredictable policy making of the U.S., the market was expecting a tariff deal to work out as longer-term U.S.-India strategic interests are aligned,” said Nilesh Shah, managing director of Kotak Mahindra AMC.
Analysts expect sectors such as textiles, pharmaceuticals, and automotive components, which are key Indian exports to the U.S., to be impacted the most by higher tariffs.
Along with the 25% tariffs, Trump said U.S. will also impose a penalty on India partly due to trade issues and partly because of India’s involvement in the BRICS group of developing nations, which he described as hostile to the U.S.
While the 25% tariff is slightly higher than the 15% to 20% that the market was anticipating, what requires close monitoring is the structure of the additional penalty, said Feroze Azeez, joint CEO of Anand Rathi Wealth.
Foreign portfolio investors have been sellers in India in thirteen of the last 14 sessions, partly driven by uncertainty over the U.S.-India trade negotiations.
Meanwhile, the U.S. Federal Reserve left interest rates unchanged on Wednesday as widely expected, but Chair Jerome Powell dampened expectations for an interest rate cut in September.
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