500% US Tariff Threat Jolts Dalal Street, Export Stocks Tumble

Introduction to the Market Shock

Indian export-focused companies, particularly in the textile and shrimp sectors, experienced a sharp sell-off on January 8 after the United States administration signaled its intent to pass a bipartisan bill proposing a staggering 500% tariff. This measure targets countries that continue to trade with Russia, with India being explicitly mentioned as a potential target due to its ongoing purchases of Russian oil. The news sent shockwaves through Dalal Street, as investors reacted to the potential for severe disruption in key export markets.

The Proposed Sanctions Bill

The legislative proposal, titled the Sanctioning of Russia Act 2025, aims to escalate economic pressure on Moscow by penalizing its trading partners. According to Republican Senator Lindsey Graham, a key proponent of the bill, the legislation would grant the US President significant leverage over nations like India, China, and Brazil, which Washington believes are helping to finance Russia's war efforts by purchasing discounted crude oil. The bill proposes raising duties on all goods and services imported from Russia to a minimum of 500% and empowers the President to take similar action against third-party countries engaged in such trade. The bill could be presented for a bipartisan vote as early as next week, adding to the market's uncertainty.

Immediate Impact on Indian Stocks

The market reaction was swift and severe for companies with high revenue exposure to the US. Apparel manufacturer Gokaldas Exports was among the hardest hit, with its shares plunging nearly 13% to ₹596.65. In the seafood sector, Avanti Feeds dropped by almost 7%, and Apex Frozen Foods fell by over 6%. Other textile companies also faced pressure, with Pearl Global Industries declining by around 6% and K.P.R. Mill slipping over 2%. This sharp correction underscores the vulnerability of these export-oriented businesses to shifts in US trade policy.

A History of Trade Tensions

This recent development is not an isolated event but an escalation of pre-existing trade frictions. In August 2025, the US had already imposed a 50% tariff on various Indian imports, citing New Delhi's procurement of Russian oil. That move had a significant impact, leading to a 37.5% decline in India's exports to the US between May and September 2025. Industries heavily dependent on American consumers, such as textiles, gems, jewellery, and seafood, reported substantial losses, order cancellations, and reduced shipments. Companies like Gokaldas Exports and Avanti Feeds have already seen their market valuations erode significantly since these initial tariffs were introduced.

Spotlight on Gokaldas Exports

Gokaldas Exports, which derives approximately 70% of its total revenue from the US market, has been particularly affected by the tariff uncertainty. The company's stock has been underperforming, hitting a 28-month low and losing over a third of its market value. The pressure is compounded by weak financial performance. For the second quarter of FY26, Gokaldas reported a 71% year-on-year decline in consolidated net profit to ₹8 crore. The company attributed the poor results to operational challenges in its Africa business, the impact of existing US tariffs, and startup costs for new projects.

Competitive Disadvantage for India

The tariff hikes place Indian exporters at a significant cost disadvantage compared to regional competitors. Nations like Bangladesh, Pakistan, and Vietnam have secured more favorable trade terms with the United States. For instance, the US recently reduced tariffs on Bangladeshi goods from 35% to 20%, while Vietnam also has a 20% tariff deal. This disparity makes Indian products more expensive for US buyers, potentially leading them to shift their sourcing to these other countries. An Indian-made shirt that might cost a US buyer $10 could see its price rise to over $16 with a 50% tariff, making it uncompetitive against similar products from Vietnam or Bangladesh.

India's Strategic Response

In response to these challenges, India is actively pursuing a strategy of export diversification. The government and industry are focusing on strengthening trade ties with markets in Europe, East Asia, and South Asia to reduce dependence on the US. Free Trade Agreements (FTAs) are a key part of this strategy. An FTA with the United Kingdom, for example, could eliminate 12% import duties, while an ongoing negotiation with the European Union could open up another major market. Domestically, the government has provided some relief by temporarily suspending import duties on raw materials like cotton and simplifying the Goods and Services Tax (GST) structure for the textile industry.

Analysis and Future Outlook

The situation remains fluid. While the 500% tariff bill represents a significant threat, its passage is not guaranteed. US President Donald Trump has made conflicting statements, acknowledging a good relationship with Prime Minister Narendra Modi while also expressing dissatisfaction over trade issues. The Indian government has refuted claims that it promised to stop buying Russian oil, maintaining that its energy policy is driven by national interest. For investors, the coming weeks will be critical. The vote on the sanctions bill and the progress of India's trade negotiations with other partners will determine the long-term outlook for these embattled export sectors. Companies with strong balance sheets and a clear diversification strategy may be better positioned to navigate the turbulence.

Conclusion

The threat of a 500% US tariff has created significant headwinds for India's export-oriented sectors. The immediate stock market reaction reflects deep concerns about profitability and market access. While companies and the government are taking steps to mitigate the impact through diversification and new trade deals, the uncertainty is likely to persist in the near term. The outcome of the US legislative process and the evolving dynamics of global trade will be crucial in shaping the future of India's textile and seafood exporters.