According to media reports, the European Union (EU) has rejected US President Donald Trump’s proposal to impose a 100% tariff on India as punishment for buying Russian oil.
Experts see it as a major diplomatic win for India and expect the Indian stock market to react positively to the development in the near term. The stock market benchmark Nifty 50 closed above the 25,000 mark on Thursday, September 11, clocking a modest gain of 32 points, or 0.13 per cent.
Trump, according to reports, had pressed the EU to impose Chinese and Indian goods with hefty tariffs of 100 per cent to increase pressure on Russia to end its war in Ukraine.
This was in sharp contrast to his Tuesday updates that trade negotiations between India and the US were continuing to address the trade barriers between the two nations.
A shot in the market’s arm?
Experts say the EU’s refusal to accept Trump’s proposal to impose 100 per cent tariffs on India is a positive development. It signals that the world is not seeing India through Trump’s lens and also indicates that the talks between India and the EU for the proposed free trade agreement (FTA) remain on course.
According to news agency PTI, the next round of talks for the proposed FTA between India and the European Union started on Monday, September 8. The current round of talks – the 13th – is important as there is a deadline to conclude the FTA talks by the end of this year.
After the 13th round of talks, European Commissioner for Trade Maros Sefcovic is scheduled to visit India on September 12 to take stock of the progress of the negotiations with Union Commerce and Industry Minister Piyush Goyal, the PTI report said.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, pointed out that the EU, which is India’s second-largest trading partner, is deepening FTA negotiations, driven by Europe’s need for alternative supply chains amid global trade tensions.
“India’s trade surplus with the EU has expanded, reflecting growing European demand for Indian products. With an FTA expected by year-end, stocks with ‘India-first’ business models and diversified export bases will likely be attractive investment options for long-term prospects,” said Srivastava.
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Given that the EU views India as a key strategic ally, experts had widely anticipated the rejection of Trump’s 100 per cent tariff plea.
“The EU’s move was expected. EU agreeing to Trump’s proposal would indicate he was influencing the EU’s strategic decisions also,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.
Tapse believes the development will influence market sentiment as it signals the world is not going to toe Trump’s line on tariffs. However, there may not be any meaningful immediate impact.
“Earnings are the main trigger which will give the market a major boost. Even FIIs are waiting for earnings to revive. There should be some improvement in Q2 earnings,” said Tapse.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said this report is definitely positive, but there are other significantly positive developments.
“We expect a sharp rebound in economic growth. The cumulative impact of the income tax cuts, the monetary policy stimulus and GST rate cuts will be significant. We can expect a rebound in earnings also from Q3 onwards. The additional 25 per cent US tariff will also go in the coming months,” said Vijayakumar.
Notably, Fitch Ratings expects India’s economy to grow at 6.9 per cent in FY26, up from its June estimate of 6.5 per cent, citing stronger-than-expected momentum in the services sector and resilient spending from both households and the government.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
