A STUDY ON IMPACT OF TARIFFS IMPOSED BY US GOVERNMENT ON INDIAN STOCK MARKET

Abstract

The imposition of tariffs by the United States government under the Trump administration's trade policy framework has emerged as a significant macro-financial risk factor for emerging market economies, with India's stock market exhibiting measurable sensitivity to US trade policy announcements and tariff escalation events. India's bilateral trade relationship with the United States, valued at USD 129 billion in FY 2023–24 and representing a USD 45.7 billion trade surplus in India's favour, places India among the primary targets of US reciprocal tariff policy, with the April 2025 announcement of 26% reciprocal tariffs on Indian exports generating an immediate and significant equity market reaction. This study examines the impact of US government tariffs on the Indian stock market, analysing Sensex and Nifty 50 index reactions to major tariff announcement events, sectoral vulnerability differential analysis across IT, pharmaceuticals, textiles, automotive, and metals, FII outflow patterns, INR/USD exchange rate dynamics, and broader macroeconomic transmission channels from US trade policy to Indian equity valuations. Primary data was collected through structured questionnaires administered to 100 respondents comprising equity analysts, portfolio managers, and institutional investors. Secondary data was sourced from BSE and NSE historical price data, RBI financial stability reports, DGCI&S trade statistics, OECD trade policy publications, and academic literature on tariff-equity market linkages. Findings indicate that US tariff announcement events have generated average Nifty 50 single-day declines of 1.8–2.4% in event windows, with export-oriented sectors including textiles (−8.2%), metals (−6.7%), and auto components (−5.9%) recording the sharpest sectoral corrections. Recommendations address portfolio hedging strategies, sector rotation frameworks, and policy advocacy priorities for mitigating US tariff impact on Indian market participants.