Trump tariffs on India: From 25% to 50% — the tariffs imposed by US President Donald Trump have doubled in just one week, leaving investors worried and confused. With no resolution in sight to an India-US trade deal, and neither side ready to budge, the question remains: Should investors pivot to cash until clarity emerges?
Trump’s erratic trade policies have put investors on edge. Analysts see a limited impact on the economy and sector-specific drawdowns, instead of the entire market-wide selloff.
Goldman Sachs had previously estimated a potential direct impact of around 0.3 percentage points (annualised) on India’s real GDP growth, following Trump’s surprise announcement of a 25% tariff on Indian imports. Now, if the new additional duty (including exclusions) is enforced, it would constitute a potential incremental drag of around another 0.3pp, the brokerage added.
The Indian stock market reacted to the additional Trump tariffs with a 0.6% decline. Sensex shed over 500 points while Nifty briefly dipped below 24,400.
Explaining the rationale behind Trump tariffs, Vinit Bolinjkar, Head of Research at Ventura Securities, said everything Trump tariffs are a double-edged sword. One, they want to make Russia irrelevant — geopolitically, they want a grip on everything. “And now, they’re trying to do something similar with India and China.”
“The second reason is that their economy is a complete mess. Other than cutting back on spending, they really have no other option,” Bolinjakr said.
These tariffs, he explains, slow down domestic consumption (because buying goods at a 20% premium is tough) and pressure global exporters at the same time. “If the US were to scale back its debt without imposing external pressure, consumption would fall — but other countries would keep growing and making profits. By imposing tariffs, they try to force a slowdown everywhere else too.” Their idea is to make the US economy look relatively better by weakening others, he added.
Is cash king now?
Indian mutual funds have already been sitting on a vast amount of cash holdings. While the figure declined substantially in the month of June, a significant portion of this capital was deployed into primary market issuances, raising questions about whether institutional investors see fewer compelling opportunities in the secondary market, and if retail investors should take a cue.
Bolinjkar said that keeping all this uncertainty in mind, I believe it’s best to stay away from the markets for now. We might see a short-term relief rally next week — but that should be used to pair positions, reshuffle portfolios, not to add more, he advised.
“This is not the time to buy more. If you’re holding, fine, don’t book unnecessary losses. But if you’ve got loss-making positions, consider taking them for carry-forward loss. Restructure your portfolio for strength — but without putting new money to work. It’s definitely not a time to average,” he said.
Similarly, Om Ghawalkar, Market Analyst, Share.Market, also said that holding a higher cash allocation does make sense while we wait for more clarity on trade policy, but remember that thoughtful stock selection remains essential.
“Rising trade tensions often fuel risk-off moves, particularly in export-heavy sectors and stocks with substantial international exposure. In such environments, holding higher cash levels is seen as a defensive strategy to preserve capital and maintain tactical flexibility. This cash-heavy posture allows investors to seize opportunities as clarity emerges quickly,” Ghawalkar added.
He, however, advised against steering clear of equities completely. Instead, concentrate on specific areas of the market, such as domestic defensives or high-quality large-caps, he opined.
Meanwhile, G Chokalingham, Founder, Equinomics Research, believes that investors can continue to remain in domestic-focused sectors for now, and consider moving to cash positions only if the service sector is disrupted.
“IT service export is about $140 billion to the US. So, if there is any attempt to disrupt that through some restrictions, then one has to be concerned about the whole market,” Chokalingham added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
