August 9, 2025

Bengaluru is feeling the heat! The US President Donald Trump recently announced a hefty 25% tariff, and India's IT sector is staring at a double trouble. Why? Because as artificial intelligence makes IT services faster and cheaper, companies expect more business. But these new tariffs could throw a big wrench in the works. The Indian IT sector was hoping for clearer trade rules by August, which might have boosted spending by American consumers. Instead, the extra 25% tariff threatens to shake confidence and freeze spending that is already delicate. Phil Fersht, CEO of US-based HfS Research, calls Trump's tariff "the new IT services wrecking ball." He explains, "While services aren't directly taxed, the new tariffs stoke inflation in the US, forcing American firms to tighten discretionary spending." This means businesses will spend less on extras like consulting and IT outsourcing deals. Fersht adds, "As manufacturing, logistics, and retail customers reel from higher input costs, they'll look to slash consulting and IT outsourcing contracts first, slowing deal cycles and delaying rollouts." He warns that companies in manufacturing, logistics, and retail will feel the most pain by the September quarter. It's like a brake suddenly slammed on the giant US economy, hurting tech budgets everywhere. Since India earns over half of its $190 billion IT revenue from the US, this could hit the sector hard. Kotak Institutional Equities also shares this gloomy picture. Their recent report says the doubt over America's tariff rules has already slightly hurt demand, especially in retail, logistics, and manufacturing. The hi-tech industry, however, is still investing in the future, focusing on AI technology while cutting back on other expenses. Healthcare is under pressure too, with insurance payers worried about costs and Trump's threats on drug tariffs and pricing shaking the pharma world. In simple words, India's IT boom might hit a rough patch as America's new tariffs ripple through businesses, forcing them to tighten their purse strings. The next few months will be crucial as the sector braces for a possible slowdown.

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Tags: Us tariffs, Indian it sector, Donald trump, It services, Economic impact, Discretionary spending,