- US tariffs on Canada, Mexico, and China create uncertainty for Indian IT firms.
- Brokerages trim earnings estimates for TCS, citing global economic slowdown.
- TCS Q4FY25 growth projection revised to 0.6%, long-term growth outlook weakened.
Impact of US Tariffs on TCS & Indian IT Sector
The latest tariffs imposed by US President Donald Trump on Canada, Mexico, and China have intensified economic uncertainty for Indian IT giants like Tata Consultancy Services (TCS). Amid rising geopolitical risks, brokerage firms InCred Equities and JM Financial have downgraded their earnings forecasts for TCS, reflecting weaker IT spending by global clients.
Key Reasons for Downgrade:
Slower global growth impacting IT budgets
US tariffs creating client uncertainty
AI-led productivity gains reducing revenue opportunities
Delayed interest rate cuts adding financial pressure
US Tariffs & Market Instability
On Monday, March 3, 2025, Trump reaffirmed 25% tariffs on Mexico and Canada and 10% tariffs on Chinese goods, further dampening investor sentiment in the IT sector.
Why does this matter for Indian IT firms?
- TCS and peers rely heavily on North American clients for revenue.
- Unstable trade policies make long-term contracts uncertain.
- Global economic slowdown may delay large IT deals and reduce spending.
TCS: Earnings Outlook & Revised Targets
InCred Equities’ Revised Projections:
- Q4FY25 US dollar revenue growth: 0.6% (down from earlier estimates).
- FY25-27 US$ revenue CAGR: 4.5% (previously 7.5%).
- Target price cut to ₹3,925 (from ₹4,915).
Risks Identified:
Longer vendor transition times
Potential ‘America First’ policy revival
Project cancellations and slower recovery in North America’s BFSI sector
However, TCS remains strong in execution, with only a slight EBIT margin dip (30 bps to 25.4%) expected. Stable dividend payouts and cash flow certainty still support its long-term fundamentals.
Market Sentiment & Future Risks
The Nifty IT Index has underperformed the broader Nifty by 7% year-to-date and 1% since February 2025, reflecting the growing concerns.
What’s next?
- Continued volatility in US trade policies may bring further challenges.
- Recovery in North American markets will be crucial for growth.
- Client spending patterns will shape future IT earnings trends.
The Indian IT sector has proven resilient in the past, but investors remain cautious amid trade tensions and economic headwinds.
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