Trump Shifts Gears: Auto Stocks Hit the Brakes, IT Trips, and the Dollar Flexes (Indian stocks)

 

Who is Trump ?

He is the most absolute capitalist I have ever seen in my life. Some people also call him the 'Tarrif King' and all that stuff. He is also seen praising India and Modi a lot. He openly says that he is a fan of Modi.

Lets leave the political part to the side and cut to the chase. Why are the Auto stocks  tumbling ?

The reintroduction of Trump administration at the oval indicates at a few major threats to the Indian manufacturing sector, primarily due to protectionist policies and trade tariffs that were prominent in his first term. This was not start a global trade warfare. All these policies were aimed towards 'America First'. It affected the world foreign industries very negatively, including India’s, which relies on the U.S. market for substantial auto exports and component supplies.

📈 Increased Tariffs and Rising Costs

One of Trump administration's most defining policy was to tax the imported goods very excessively, including auto parts, to protect the jobs of the people in the USA. For India, this meant a higher cost of exporting cars and auto part to the USA. The increased tariffs could cause:

• Rising Manufacturing Costs:Many Indian car manufacturers depend on the automotive part imported from the USA. Higher tarrif barriers would also mean higher cost of production process .
• Price Hikes on Exports: For Indian-made vehicles exported to the U.S., the tariffs drive up prices, making these vehicles less competitive in the American market. Consequently, this reduces the demand for Indian vehicles and components.
  

  
  

  Clearly, Trump winning the election has not favourably priced in the Nifty Auto Index.

🧑‍💻 H-1B Visa Restrictions and Impact on Indian IT Sector

Trump’s administration introduced tighter restrictions on H-1B visas, which impacted Indian IT professionals working in the U.S in his previous tenure. By limiting visa renewals and imposing higher fees, these restrictions affected India’s IT sector, which generates significant revenue from U.S. contracts.

1. Increased Denial Rates:H1-b denial rate in the USA in 2015 was 6% and it rose to 24% in 2018. Companies like TCS and infosys were forced to hire locally.
2. Local Hiring Costs: To offset visa limitations, Indian IT companies increased their local U.S. hiring. Infosys, for example, committed to hiring 10,000 American workers. While this adaptation helped, it reduced profits and created operational challenges.
3. GDP Angle: Usually when indian workers go to abroad for work purposes, the contribute to the GDP of India in form of Net Factor Income From Abroad (NFIA). That benifit to India would start diminishing. They want to keep their jobs for themselves.
   

This kind of policy would really take a toll on IT sector as "According to recent reports, major Indian IT companies like TCS and infosys are facing significant losses due to a global slowdown in demand, leading to large-scale employee exits and a decline in headcount, with many experiencing "silent layoffs" as a result of cost-cutting measures; this is primarily attributed to tighter tech spending by clients in the current market environment."

-  TOI

India heavily depends on the Silicon Valley for its IT revenues. Increasing tarrif and increasing tarrifs would harm the profitabilty of the company. This can be considered as an expected loss for the companies, and expectd losses are always price into the cost of service to manage risks. This will increase the costs significantly.

Particularly, the Trump administration has also said that they would be working to increase the strength of the dollar. but why should we be scared about it.

• When the U.S. dollar flexes its muscles, everything gets more expensive—especially commodities like oil, timber, and metals, which are priced in dollars. So, as the dollar strengthens, these costs spiral in local currencies, fueling inflation worldwide.
• Now, for low-income countries, things get a lot trickier. Most of them owe their debt in dollars, meaning a stronger greenback makes it harder to pay up, often triggering recessions, hyper-inflation, or full-blown debt crises. The result? Years of economic struggle and hardship for their people. Welcome to the "strong dollar" hangover.

Technically speaking, there has been an ascending triangle breakout in the charts of USDINR. There are high chances that we can see see this shoot to 90 very soon if this kind of policy continues.

Trump’s back, and so are the tariffs. Indian auto stocks are feeling the heat as higher costs and reduced demand loom, thanks to his ‘America First’ agenda. Add tighter H-1B visa rules and a flexing U.S. dollar, and India’s IT sector isn’t exactly thriving either. With the greenback strengthening, global inflation’s about to skyrocket, and low-income countries are in for a rough ride. The result? Higher prices, lower profits, and a whole lot of uncertainty. Buckle up!