The re-emergence of Donald Trump as US president and his aggressive implementation of tariffs—including a sweeping 25% duty on many Indian imports effective August 1, 2025—have sent shockwaves through India’s export ecosystem. While the most visible effects target goods like electronics, textiles, jewellery, and pharmaceuticals, the outlook for Indian IT services exports is far more nuanced.
Direct vs. Indirect Impact on IT Services
No Direct Tariff Yet:
Indian IT services—the backbone of India’s export economy—are not directly subject to the newly announced US tariffs. Tariffs apply to goods, not cross-border digital services or software exports. India’s IT export revenue remains robust, with $210 billion projected for FY25, making up 18% of all global outsourced IT spending.
Ripple Effects Are Real:
Despite escaping direct tariffs, IT services face substantial risks from the changed economic landscape:
- US Cost Pressures: The higher cost of goods in the US can push American companies to scale back discretionary tech spending or delay digital transformation projects, squeezing the very demand Indian IT depends on.
- Industry Slowdown: Large Indian IT companies such as TCS, Infosys, and HCL, already reporting softening demand, could face further delays in client decision-making and tech budget contraction.
- Workforce Mobility: Uncertainty around US work visas, especially the H-1B, remains a threat. Any immigration crackdown could restrict the movement of skilled Indian IT talent to the US, impacting project delivery and competitiveness.
Broader Macro Environment
- Protectionism and Fragmentation: Trump’s “America First” agenda, characterized by trade protectionism and stricter foreign worker policies, is expected to persist, adding a layer of uncertainty for Indian IT’s largest market (the US accounts for about 70% of sector revenue).
- Tech Innovation and Automation: The transition to hybrid delivery models and rapid adoption of artificial intelligence (AI) are now survival strategies for Indian IT firms to maintain relevance and cost advantage, given the uncertain and more fragmented global trade environment.
Future Outlook: Challenges and Pathways
Short-Term:
- Indian IT services are not immediately hit by the 25% tariff, but must brace for lower US demand, especially in discretionary spending verticals such as retail and manufacturing.
- Workforce and consulting projects that rely on talent mobility could be disrupted pending any changes to US visa rules.
Mid-to-Long Term:
- Diversification is crucial: Lessening dependency on the US by targeting emerging markets and high-value segments such as digital transformation, AI, and consulting services.
- Value Chain Upgradation: Moving up from traditional outsourcing to more specialized solutions (e.g., cloud, cybersecurity, digital engineering) to reduce vulnerability to pure price-based competition.
- Indo-US Trade Negotiations: The future of Indian IT will also hinge on the outcomes of bilateral talks—as both nations negotiate digital trade, taxation, and work visa frameworks.
Optimism Remains—but With Caution:
Large-cap IT exporters with deep US exposure may experience margin and revenue pressures, while those with diversified client bases are likely to be more resilient. The sector’s proven adaptability, investment in AI, and hybrid delivery models offer a pathway to sustained growth, albeit with tempered expectations amid global uncertainty.
In Summary:
The rise of Trump-era tariffs poses considerable indirect risks for India’s IT export story—even if the sector dodges direct duties. Navigating this “new normal” will demand agility, geopolitical savvy, and decisive strategic pivots from India’s IT giants and policy planners alike.
