The implementation of blanket tariffs by the US has triggered a wave of economic uncertainty reminiscent of the COVID-19 pandemic, sending shockwaves across global markets and raising concerns about inflation, trade disruption, and a looming recession.
A Return to Pandemic-Level Uncertainty
The abrupt imposition of wide-ranging US tariffs has introduced an extraordinary level of uncertainty across global markets, evoking strong parallels to the disarray witnessed during the COVID-19 pandemic. Unlike the bear market that began in September 2024—a correction broadly seen as a necessary recalibration of overvalued equities—this new development is systemic and unpredictable.
These tariffs were, by all accounts, “completely out of syllabus,” catching even the most seasoned observers off guard. Their scope and suddenness qualify them as a true black swan event, with ripple effects not just confined to US or Indian markets but extending across Japan, Europe, and other major economies.
In military parlance, the current scenario resembles the “fog of war”: high uncertainty, a lack of visibility, and deep confusion over strategic direction. In 2020, that fog was created by a virus. In 2025, it stems from an aggressive shift in US trade policy.
Economic Dislocation and the Risk of Global Contraction
From a macroeconomic perspective, the implications of these tariffs are far-reaching. The blanket nature of the duties ensures that no economy remains insulated, and in the short term, the tariffs are likely to be highly inflationary. With cost structures disrupted and supply chains under stress, the global economy could experience a drag in consumption and investment.
There is a growing consensus that the US GDP may contract in response to these measures. Should this occur, the resultant slowdown would further weigh on global economic momentum. For India, the pain may persist unless bilateral trade agreements are swiftly negotiated to provide exporters with clarity and tariff relief.
Market Response: A Swift and Severe Correction
Equity markets have already priced in significant distress. Since the tariff announcement, the S&P 500 has corrected by 10.53%, with the NASDAQ falling an even steeper 11.44%—reflecting the vulnerability of US tech majors. The Dow Jones has also declined by 9.26%, underscoring the breadth of the correction.
China remains the largest contributor to the US trade deficit, and the effective tariff burden on Chinese goods is now approaching 100% when factoring in both existing and new measures. India, too, is facing acute exposure. A 10% base tariff went into effect on April 5th, and an additional reciprocal tariff will be implemented on April 10th—bringing the total burden on Indian exports to 26%.
This is particularly concerning given that India’s exports to the US stand at approximately $88 billion, constituting 18% of total exports. In other words, nearly one-fifth of India’s external trade is now vulnerable to a shifting tariff regime.
Sectoral Impact
The fallout is not uniformly distributed. Several sectors face unique challenges:
Chemicals: Export-heavy firms like PI Industries (43% US exposure), SRF (11%), and Vinati Organics (20%) are at risk. The removal of a prior 3.5% import duty waiver by the US could pressure EBITDA margins, especially if companies are unable to fully pass on rising costs.
Shrimp Industry: Perhaps the most exposed, Indian seafood exporters now face a 34.26% tariff in the US—far higher than Ecuador’s 13.78%. With Indian exporters already struggling with elevated freight costs, the sector faces serious headwinds, as noted in recent government advisories.
IT Services: Though not directly impacted by tariffs, IT firms are exposed through second-order effects. A US slowdown could hurt key verticals like retail, manufacturing, and logistics. Firms such as HCL Tech, Tech Mahindra, LTIMindtree, and Infosys, which have significant exposure to these verticals, may see reductions in client budgets.
Pharmaceuticals: While domestic-focused pharma players may be insulated, CDMO and generic exporters face a mixed outlook. On one hand, tariffs pose a threat; on the other, US-based Indian CDMOs (e.g., Piramal Pharma, Suven, Jubilant) could benefit. However, unless the US takes a hardline stance on API localization, the near-term impact may remain limited.
Automotive: A 25% US tariff continues to impair exports from firms like Tata Motors (via JLR), which derives a large portion of its revenue from the US.
Metals: Hindalco’s subsidiary Novelis, based in the US, could potentially benefit from tariff-induced shifts in sourcing.
Solar Energy: Companies like Waaree, with substantial US order books, are facing cancellation risks due to the 26% duty, making deals economically unviable.
Industrials: Exporters such as Cummins, Thermax, and Polycab are expected to experience pressure, though higher Chinese tariffs may offer limited substitution opportunities.
Textiles: The sector is at risk of demand destruction. Though the tariff gap with Bangladesh has narrowed, economic weakness in the US and the discretionary nature of apparel purchases make Indian textile exports vulnerable.
Strategic Imperative: Bilateral Trade Agreements
India’s decision to implement reciprocal tariffs is seen as a prudent, sovereign response. Yet, the broader resolution lies in the resumption and acceleration of bilateral trade negotiations. The current crisis may well serve as a negotiation lever for both sides to arrive at a mutually beneficial framework.
In many ways, the current environment marks the most dramatic shift in global trade architecture since the Great Depression. With the rules being rewritten in real time, investors must remain nimble, manage risk meticulously, and look beyond the volatility toward long-term structural opportunities.
The blanket US tariffs have disrupted market equilibrium, triggered sharp corrections, and ushered in an era of heightened uncertainty. Their ripple effects are being felt across continents and sectors. For India, this is a moment of both vulnerability and potential. The coming weeks will be crucial in determining whether this event deepens into a sustained downturn—or becomes a catalyst for a reimagined global trade order rooted in resilience and reciprocity.
