Infosys, TCS Better Positioned Against Trump’s Stricter Policies

US Tariffs and Immigration Rules Pose Risks to South and Southeast Asian Businesses

Global ratings agency Moody’s has identified automotive, steel, chemicals, and business-services sectors in South and Southeast Asia as being the most vulnerable to US President Donald Trump’s proposed tariffs and evolving economic policies. The report highlights the impact of new US trade restrictions and their potential consequences for Indian companies, especially in sectors highly dependent on exports or foreign labor.

With the US set to impose reciprocal tariffs from April 2, companies from India, which has a significant trade deficit with the US, are expected to face heightened risks. Moody’s report outlines the industries most exposed to these changes and evaluates the impact on major Indian firms.

IT and Business Services Sector: Infosys and TCS Less Affected

The business-services sector, particularly IT outsourcing, is not directly subject to tariffs, but remains highly vulnerable to stricter US immigration policies, which could shrink the skilled labor pool and drive up costs for companies dependent on foreign workers.

According to Moody’s, Tata Consultancy Services (TCS), Infosys, and Hexaware Technologies have already increased onshore hiring in the US to mitigate potential disruptions from changes to H-1B visa regulations.

The report states that:

• Indian nationals accounted for nearly 75% of all H-1B visas issued in 2023, underscoring the sector’s dependence on Indian IT professionals.
• Stricter US immigration rules could limit the availability of skilled foreign workers, affecting companies that rely on Indian talent for long-term US assignments.
• Higher costs associated with hiring US workers could reduce profit margins for companies that fail to adapt.

Moody’s noted that Infosys and TCS remain resilient due to their industry-leading profitability, enabling them to absorb increased costs better than smaller competitors.

Despite these assessments, stock market reactions were mixed:

• Infosys shares were trading at ₹1,588 apiece on March 17, showing marginal gains.
• TCS shares dropped 0.48% to ₹3,494 per share.
• Hexaware Technologies’ stock remained flat at ₹471 apiece.

Steel and Chemicals: Minimal Direct Impact but Indirect Risks Loom

Moody’s assessment of the steel and chemicals sectors suggests that US tariffs may have limited direct impact on major Indian producers, but indirect risks remain due to global trade shifts.

The report highlights that:

• Rated steel and petrochemical producers, including Tata Steel, JSW Steel, and PTT Global Chemical Public Company, derive most of their revenue from Asia and have little to no exposure to US exports.
• India’s steel and chemical producers could face pricing pressure as cheap exports from other countries are redirected to India due to US tariffs.
• China’s steel industry continues to flood the Indian market with low-cost exports, exacerbating competition for domestic producers.

The report specifically mentions that JSW Steel’s US operations in Texas and Ohio may offer some relief, but their contribution to total revenue remains limited at approximately 7%.

US Tariffs on Indian Exports: Automotive, Chemicals, and Manufacturing at Risk

The automotive sector is also expected to be affected by increased US import duties, particularly for manufacturers that export auto components to the US. Moody’s report highlights that:

• Indian automakers with direct exposure to the US market could face reduced demand due to higher prices for imported vehicles and parts.
• Suppliers of steel and chemicals to the automotive sector may also be impacted by lower demand from US-based car manufacturers.

Additionally, chemical manufacturers exporting to the US could face rising costs and lower competitiveness if tariffs make their products less attractive compared to domestic alternatives.