TACO trade crumbles: Trump's fresh 25% tariff hammer falls tomorrow as export stocks crash

The TACO trade, betting that “Trump Always Chickens Out” given the US President’s history of flip-flops, spectacularly imploded as President Donald Trump’s additional 25% tariff on Indian goods kicks in from tomorrow, sending the Sensex tumbling nearly 850 points and leaving export-oriented stocks gasping for breath. The combined market capitalisation of all listed stocks on BSE fell by around Rs 6 lakh crore.

With hopes of any last-minute reprieve dashed, the Nifty slipped about 1%, as export-heavy sectors like textiles, fisheries, gems, and jewellery found virtually no buyers. The tariff hike doubles the effective rate to 50%, putting India alongside Brazil in facing the world’s steepest trade barriers.

“Indian textile and apparel exporters are halting US order manufacturing due to President Trump’s tariff doubling to 50%, severely impacting competitiveness against nations like Bangladesh and Vietnam,” Morgan Stanley warned in a scathing assessment.


The carnage was swift across textile counters. Kitex Garments, Pearl Global, KPR Mill, Bombay Dyeing, and Indo Count Industries sank 3–5%, while US-exposed majors such as Welspun Living, Gokaldas Exports, and Trident, deriving 40–70% of revenues from America, saw their positioning severely eroded.

Morgan Stanley’s damage assessment underscores the staggering scale: “The Indian seafood export industry alone faces potential losses of Rs 24,000 crore due to the US doubling tariffs to 50%. This puts India at a significant disadvantage compared with competitors like Ecuador, hurting exporters and potentially farmers.”

Shrimp exporters felt the immediate sting, with Avanti Feeds and Apex Frozen Foods sliding 1–2% as their US market share came under threat. Goldiam International, which earns 90% of revenue from the US, tumbled over 2%, while granite exporter Pokarna shed 1%. Bharat Forge, with 40–45% of revenues tied to the US, fell more than 1%.

Auto component makers were not spared either. Balkrishna Industries, which derives 15% of tyre volumes from the US, slipped 1%. Ramkrishna Forgings, reliant on North American orders, shed 1%. JK Tyre dropped 2% as its Mexican subsidiary faces potential collateral damage from exports routed to the US.

Jefferies estimates suggest the tariff shock could jeopardise a majority of India’s $87 billion exports to the US, about 2.2% of GDP. Only pharmaceuticals and electronics, which account for roughly 30% of India’s US shipments, remain exempt for now.

Also Read | Xenophobic autarky! Jefferies' Chris Wood on 50% tariff against India

The broader market trauma comes as FIIs have already pulled Rs 1.17 lakh crore from Indian equities, with both July and August seeing relentless net selling pressure.

“Minimise exposure to export-oriented and globally linked sectors. Even if the final trade agreement is not as bad as it appears, a sharp global slowdown looks inevitable,” Emkay Global cautioned investors.

Yet, amid the chaos, some strategists spot opportunity. “Buy the dip if the market correction deepens beyond 5%. Valuations would then slip well below the LTA, and the direct earnings impact on listed firms remains negligible,” Emkay advised, arguing that India’s 2HFY26 cyclical recovery, driven by domestic impulses, stays intact.

Prabhudas Lilladher echoed that optimism, remaining constructive on domestic-facing sectors. The brokerage maintains overweight positions in Banks, Healthcare, Consumer, Telecom, Auto, and Capital Goods, while staying underweight on IT services and commodities. It even added Adani Ports to its model portfolio, calling it “a structural play on Exim trade and India’s growth.”

The tariff shock, however, underscores a harsher reality: while direct earnings damage may be limited, the second-order fallout of bringing Indian exports to the US to a near standstill could devastate employment-heavy sectors like textiles and jewellery, creating ripple effects far beyond stock prices.

Also Read | Tariff tandav on India’s $87 billion export machine. Decoding impact on economy, markets