India Poised for Favorable US Trade Deal Despite Trump’s Tariff Threat

Despite U.S. President Donald Trump’s announcement of a 25% tariff on Indian imports and penalties for Russia trade, effective August 1, 2025, Saurabh Mukherjea, Founder and CIO of Marcellus Investment Managers, remains optimistic about a favorable India-U.S. trade deal within months. Speaking to NDTV Profit, Mukherjea described the tariffs as a “pressure tactic” to curb India’s Russian oil and arms purchases, predicting that India will likely secure a deal with tariffs below 25% by September or October. “TACO—Trump Always Chickens Out—is well-known in American trading circles. It’ll soon be popular in India,” he quipped, suggesting Trump’s hardline stance may soften.

Mukherjea highlighted India’s strategic importance to the U.S., particularly in reducing reliance on China for electronics (e.g., Apple’s supply chain) and active pharmaceutical ingredients (APIs), where India supplies 20–30% of U.S. needs compared to China’s 70–80%. He expects key Indian exports—IT, pharmaceuticals, and electronics—to be exempt from punitive tariffs, citing their critical role in U.S. markets. Companies like Divi’s Laboratories, Acutas (formerly Ami Organics), and Dixon Technologies were flagged as strong investment bets, especially if stock prices dip due to market overreactions.

The tariffs, announced on July 30, aim to address India’s $45.7 billion trade surplus with the U.S. in 2024 and its high tariffs (17% average vs. U.S.’s 2.2%). However, agriculture and dairy remain sticking points, with India protecting its farmers, as Finance Minister Nirmala Sitharaman emphasized. Indian officials, per Reuters, expect renewed talks with a U.S. delegation in mid-August, aiming for a comprehensive agreement by October. Mukherjea cautioned that India’s economy, deeply tied to global markets, faces risks from a domestic consumption slowdown and fragile job market, potentially lasting several quarters.

Also Read: Trump’s ‘Dead Economies’ Jab Forces India to Rethink Global Strategy

Mukherjea’s earlier warnings about diversifying investments due to India’s “expensive” market and slowing growth align with his current outlook. He advocates shifting from overvalued Indian small caps to U.S. small caps, which offer better valuations and faster earnings growth. The Sensex and Nifty’s recent 786- and 212-point drops reflect market jitters, but experts like FICCI’s Harsha Vardhan Agarwal see the tariffs as temporary, expecting a deal to leverage India’s strategic alignment with the U.S.

As India navigates Trump’s trade war, its pivot toward alternative markets like the EU and ASEAN, alongside BRICS cooperation, could mitigate impacts. With Commerce Minister Piyush Goyal citing “fantastic” progress, India’s resilience and negotiation leverage may secure a deal that protects its economic interests.

Also Read: India Grapples with 'CAP' Crisis: Congress Slams Modi Amid U.S. Tariff Hike