According to Moody’s Ratings, India has a lower overall exposure to the US compared to other countries in the APAC region. However, certain sectors such as food, textiles, and pharmaceutical products face risks. The majority of companies in Moody’s rated portfolio are focused on the domestic market with limited exposure to the US.
To address pressure from reciprocal tariffs, the US and India are in talks to lower import tariffs on selected US products, increase market access for US farm products, and boost US energy purchases. They are also looking to kickstart a trade deal by the fall of 2025.
Moody’s noted that developing countries in APAC like India, Vietnam, and Thailand have some of the widest rate differentials with the US. Sectors such as electronics, motor vehicles, food, and textiles are among the most exposed. Emerging economies attempting to follow an export-led growth model similar to China may struggle to compete in a more interventionist trade environment.
US President Donald Trump has announced plans to impose reciprocal tariffs on trading partners, including India. The new US administration has already implemented additional tariffs on imports from China and on steel and aluminium.
Moody’s emphasized that while the US exports food, feeds, and industrial supplies to APAC, it also imports capital goods, automotive vehicles, consumer goods. Reciprocal tariffs could impact key sectors in APAC with exposure to US demand, such as computer and electronic products, chemicals, motor vehicles, food, textiles, and wood products.
Moody’s Ratings stated that India has lower overall exposure compared to other countries in the region, but sectors like food, textiles, and pharmaceuticals are at risk. The response of APAC countries will be crucial in determining the impact on credit strength.
The rating agency expects governments to act pragmatically to avoid escalation with the US, opting for bilateral negotiations. With a more restrictive trading environment, currencies of targeted APAC economies may face downward pressure due to higher capital outflows and a stronger US dollar. Central banks in the region may have limited room to ease monetary policies to support economic growth.
Despite the challenges posed by US trade policies, Moody’s believes that most economies in the region have strong macroprudential buffers and sound monetary policies in place to mitigate external shocks. Domestic demand remains robust in many areas, supported by favorable global and regional financial conditions.
In light of the upcoming disruptions in the world trading system, governments in the APAC region may be more inclined to cooperate with each other, according to Moody’s.
