Trump Tariffs Will Have Huge Impact Indian IT Firms, Analysts Say
The $283 billion IT sector must now brace for a tough year ahead following the new US tariffs announced by President Donald Trump on April 3, Reuters reported. Analysts say that the tariffs could trigger inflation in the US, forcing clients to reduce spending.
Considering that the US is a key market for Indian IT firms, the impact of tariffs will hit the sector hard. Last week, India made several trade concessions to the US in a bid to prevent sweeping tariffs.
No Direct Tariffs
President Trump did not impose direct tariffs on IT services. However, the Indian tech industry could slow down as US clients adjust to the new duties. This will mostly happen in the logistics, manufacturing, and retail sectors. Analysts say that this will likely slow deal cycles, cause delay in completion of ongoing projects, and affect revenue growth.
The US economic slowdown will likely affect many Indian IT giants including Infosys and TCS, as well as automobile companies like Tata Motors. Trump tariffs have affected India’s stock market, with shares of automobile, pharmaceutical, and steel companies declining over the last two days.
The latest tariffs are expected to affect the country’s export-oriented industries, leading to revenue declines and job losses. Indian companies are working to mitigate the new tariffs by exploring alternative markets to remain competitive.
“Our analysis suggests that India’s direct export loss from higher tariffs could be limited to around $ 9-13 billion, which is 0.2-0.3% of its GDP. India’s domestically driven economy may offer some resilience,” CareEdge Ratings said.
US Recession Fears
The latest US tariffs come at a time when the Indian IT sector was counting on the Trump administration to restore client confidence and discretionary spending following years of weak revenue growth. India relies on the US for over 50% of its $190 billion software exports.
This makes the IT sector highly sensitive to spending shifts in the world’s biggest economy. On April 4, JP Morgan raised the US and global recession odds to 60% following the tariff announcement.
“With a rising risk of US recession and uncertain decision-making, we think chances of fiscal 2026 being a complete washout are rising,” J.P. Morgan said in a note.
Analysts expect IT giants in India to issue conservative revenue growth forecasts this quarter. Those that have a reliance on discretionary spending are expected to suffer a bigger blow from the slowdown that the latest tariffs have triggered.
“Discretionary IT spend will likely see an impact across the industry verticals. Companies to get impacted will typically be the high-growth companies in the large caps and some of the mid-caps where the exposure usually is much higher on the discretionary side,” BNP Paribas Analyst Kumar Rakesh said.
According to Rakesh, the impact of the US recession could become apparent as early as the September quarter.
Corporate Performance
The Trump tariffs also come at a time when Indian IT companies had reported slowing performance in the December 2024 quarter. This performance was largely attributed to rising cost of inputs and moderate urban spending.
Listed companies also reported lacklustre performance in the March 2025 quarter as sales slowed down. This performance reflects the challenging environment that businesses are operating today. The volatility created by the ongoing global tariff war is expected to complicate things further and have a real impact on India’s tech industry.
On April 4, the country’s Nifty IT index dropped 3.6%, pushing the loss registered this week to 9.15%. This is the sharpest drop the index has experienced within a week in over five years.
