In a dramatic turn of events, both US President Donald Trump and Prime Minister Narendra Modi have exchanged few pleasantries about each other and hinted towards potential trade talks in the coming weeks. Both leaders are optimistic about a trade resolution. The Indian stock market is trading on a bull run on hopes of 50% tariffs falling on India.
1. Trump-Modi Talks Coming Soon
Through his Truth Social, Trump said, "I am pleased to announce that India and the United States of America are continuing negotiations to address the Trade Barriers between our two Nations. I look forward to speaking with my very good friend, Prime Minister Modi, in the upcoming weeks. I feel certain that there will be no difficulty in coming to a successful conclusion for both of our Great Countries!
Right after Trump's announcement, PM Modi tweeted, saying, "India and the US are close friends and natural partners. I am confident that our trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership. Our teams are working to conclude these discussions at the earliest. I am also looking forward to speaking with President Trump. We will work together to secure a brighter, more prosperous future for both our people."
2. Will the US's 50% Tariff on India Fall Soon?
Up until September 9th, the relations between the US and India had soured drastically, so much so that Trump even declared 50% tariffs on major Indian goods, with effect from August 27.
One of the reasons why Trump took a jibe at India is due to its purchase of oil and arms equipment from Russia despite the US issuing sanctions on the Kremlin over its war against Ukraine.
The 50% tariffs would impact major sectors like pharma, textiles, jewellery, automobile components and engineering products in India.
If all goes well in the coming weeks, the chances of Trump's 50% tariff to fall on India is high. Trump has made concessions and lowered tariffs with many countries in the past two months once trade deals are agreed.
3. Sectors In Focus:
As per Dr. Manoranjan Sharma, Chief Economist at Infomerics Ratings, here's how the 50% tariffs of Trump would impact sectors:
- Textiles & Apparel: Margins will evaporate in a sector where pennies decide contracts. Millions of livelihoods are at stake.
- Pharmaceuticals: Indian generics-lifelines for American households-will lose market share to rivals with easier access. Ironically, American consumers will pay the price too.
- Gems & Jewellery: A labour-intensive industry that sparkles in India's export crown could suddenly go dim.
- Engineering & Auto Components: Factories risk slowdowns, workers risk pink slips, and the "Make in India" dream takes a hit.
4. Trade-Policy Volatile
While Trump and Modi will try to cool off the tariff tensions, the trade-policy globally looks uncertain.
According to SBICAPS' report, US trade tariffs are gaining traction, generating monthly revenues of roughly USD 30 bn, with India the hardest hit at a steep 50% duty since late Aug'25. Yet, uncertainty persists after a US Appeals Court deemed the levies unconstitutional. The administration has escalated the case to the Supreme Court, leaving three broad outcomes: tariffs maintained, renegotiated, or scrapped. Until clarity emerges, trade-policy volatility remains elevated, with key pressure points in autos, electronics, and textiles.
5. Indian Economy Resilient Despite Tariff Threats:
The country's GDP rose to 7.8% in Q1 of FY26, driven by y resilient private consumption, continued government capex, and a rebound in revenue spending.
"While high-frequency indicators are showing a mixed trend and trade tariff uncertainty clouds the outlook, the government's decision to simplify the GST structure is set to release ~Rs. 500 billion into the economy, boosting domestic consumption. Collectively, these measures help cushion the economy against softer export prospects and external headwinds," said SBI Capital Markets report.
6. Modi-Putin-Xi Jinping Meet
Trump's latest decision for trade talks comes few days after PM Modi met China's President Xi Jinping at 25th Shanghai Cooperation Organization (SCO) summit, which was also attended by Russia's President Vladmir Putin.
The Summit witnessed productive discussions on SCO Development Strategy, Reform of Global Governance, Counter-Terrorism, Peace and Security, Economic and Financial Cooperation, and Sustainable Development, as per PIB.
7. India-US Dependency
India's exports are well diversified; the US too has several crucial dependencies on the country.
For investment related articles, business news and mutual fund advise
Click it and Unblock the Notifications
Sign in with Google