Despite U.S. President Donald Trump’s latest move to impose fresh tariffs and penalties on Indian exports, Indian equity markets have shown resilience. The benchmark indices initially slipped but later recovered losses, indicating that the Trump tariff announcement may already be priced in and a steep market correction looks unlikely.

Market observers note that the new 25% U.S. tariffs on Indian exports, while significant in geopolitical terms, may not have a direct first-order impact on the Indian stock market. That’s largely because key affected sectors—gems & jewellery, leather, and textiles—have minimal presence in the listed equity space.

However, analysts warn that the broader market sentiment could take a hit at a time when investor confidence is already fragile due to elevated valuations and weak corporate earnings.

Prateek Agrawal, MD & CEO of Motilal Oswal Asset Management Company, stated, “This is more about sentiment. We don’t see a large direct impact on equities, but currency and foreign flows could see some volatility. Markets have been underperforming globally, and this adds to an already cautious mood.”

Reinforcing that view, Prakash Bulusu, Joint CEO at IIFL Capital, said, “India-US trade is tactical, not transformative for the market’s medium-term trend. Unless this escalates into a geopolitical or policy standoff, we don’t see it as a top-three market risk.”

Bulusu emphasized that oil price volatility, persistent U.S. inflation, and China’s economic slowdown remain far more critical concerns than the current tariff episode.

Still, a worst-case scenario involving Indian retaliatory tariffs could trigger temporary sectoral underperformance, particularly in textiles, engineering goods, and auto components.

Adding a macroeconomic dimension, Goldman Sachs noted in a report that India’s bilateral trade surplus with the U.S. has doubled from $20 billion in FY15 to $40 billion in FY25, primarily due to gains in electronics, pharmaceuticals, and textiles. Goldman warned that new tariffs could shave off 0.3 percentage points from India’s 2025 GDP growth if fully enforced.

While markets have shrugged off the initial shock, experts agree that this development will linger in the background as a sentiment overhang, especially if tensions escalate or disrupt foreign investment flows.