trump modi
US President Donald Trump and Indian PM Narendra Modi Image Credit: File

New Delhi: Indian equity markets could come under pressure over the fresh tension between the US and India over trade as India retaliated with tariffs on 29 American products, starting from Sunday.

This decision followed the US ending India's $5.6 billion trade concessions under the Generalised System of Preferences (GSP) programme.

$142b

US-India bilateral trade

Last year, the US imposed duties on steel and aluminium from India following which a retaliation was deferred until now.

Tit-for-tat
From Sunday, India has said it will impose tariffs on 29 US products, including almonds and apples. The new duties, some as high as 70%, are in response to Washington's refusal to exempt Delhi from higher taxes on steel and aluminium imports.

Earlier this month, US President Trump also announced the US was withdrawing India's preferential trade treatment. In response on Friday, India's Ministry of Finance said the decision was in the "public interest".

Several analysts have said investors sentiments would be impacted.

"Tariffs to the tune of $400-450 million from all bilateral trade of 142 billion dollars with the US — this shows that the impact is insignificant," said Ajay Sahai is the Director General and CEO of the Federation of Indian Export Organisations (FIEO).

The US-China trade war has long troubled the global financial markets. The damage was such that the global growth took a beating, as noted the International Monetary Fund (IMF).

"Local investors will be worried as to how US could react to this. However, FIIs will wait for any such move by the US before feeling the Indian market," Deepak Jasani of HDFC Securities told IANS.

"$400 million is not a big number, but 29 items consist of almonds, walnuts and apples which affect their farmers. This could trigger a response and which will not bode well for the Indian markets," Jasani added.

The Indian market, which is currently dealing with slowdown concerns, will not react well if the US announces fresh tariffs, several analysts said.

On Friday, Sensex slid and closed nearly 290 points lower after reports that the Indian government had decided to impose retaliatory tariffs. The fresh tension now adds to the slowdown concerns in the Indian markets.

More products?

"There is always a fear that tariffs can be levied on more products from either side. So from a sentiment perspective, some tension could be seen in the markets if retaliation is seen by the US," said Mayuresh Joshi of Angel Broking.

"It can hurt the investor sentiments, but beyond that it is difficult to acertain as to what could be the impact on the capital markets. Investors will get into trouble if the additional tarriffs are applied," Joshi added.

Earlier, US Commerce Secretary Wilbur Ross said in a conference that Washington could reverse the decision of withdrawing trade concessions to India under the Generalised System of Preferences (GSP) if the situation permits.

Imbalance

Ross had said that "India is already the world's third-largest economy, yet it is only the US's 13th largest export market, due to overly restrictive market access barriers", while "the US is India's largest export market, accounting for about 20 per cent of the total".

"There is a real imbalance... And it's an imbalance we must strive to counteract."