Trump Tariff Impact: Auto To Pharma—Fitch Flags Sectors Under 'Risk' Over 50% Tariff Rate

Fitch Ratings has flagged that the rising US tariffs pose a threat to Indian corporates, even for sectors with minimal direct exposure. Fitch suggests that while the immediate impact is low for most, second-order effects are rising. A US-India trade deal would mitigate these risks, but as things stand the US has imposed a 25% "reciprocal" tariff on India from August 7, 2025, with another 25% levy on Russian oil imports effective from August 27.

These are the sectors where Fitch flags rising risk for, among Indian sectors and corporates:

• Automotive: In the automotive sector, direct exports from India to the US are limited, but the US accounts for nearly 20% of sales for companies like Samvardhana Motherson International Ltd. Fitch revised its outlook on the company to "Stable" from "Positive" due to the weakened global auto sector amid tariff-related uncertainty.

• Pharmaceuticals: The US is a crucial market for Indian pharmaceutical companies. Biocon Biologics Limited generates about 40% of its sales from the US. While Fitch has not factored significant tariffs into its base case, they could pose a downside risk to the company's performance, as the competitive landscape may limit its ability to pass on higher costs.

• Crop Protection Chemicals: US customers contribute 10%-12% of total revenue for UPL Ltd. Tariffs on its Indian-manufactured products could move closer to those on Chinese goods, affecting its competitive position. Despite this, due to its global diversification, Fitch believes UPL can still meet its Ebitda growth guidance for the financial year ending March 2026.

• Oil Marketing Companies: Russian crude accounts for 30%-40% of crude imports for Indian OMCs. A full halt of these imports could hurt their Ebitda by about 10%, but the credit ratings for state-owned OMCs like Bharat Petroleum Corporation Ltd., Indian Oil Corporation Ltd, and Hindustan Petroleum Corporation Ltd., are expected to remain unaffected due to government support according to the report. HPCL-Mittal Energy Ltd., has a lower rating buffer and could be more vulnerable.

Fitch expects a minimal direct tariff impact on Indian IT services and domestically focused sectors like cement, telecoms, and utilities. Still, the report warns that if US tariffs remain significantly higher than those in other Asian markets, there could be a moderate downside risk to its projection of 6.5% economic growth for the financial year 2026.

This could negatively affect a wider range of Indian companies. Further, the diversion of supply to other markets, including India, could depress domestic prices for some products, such as steel and chemicals, according to the report.