The Impact of AI and US Tariffs on India's IT Sector

Bengaluru: The IT sector in India faces a dual challenge as AI-driven efficiency gains and the imposition of additional tariffs by US President Donald Trump threaten to slow down deal wins and discretionary spending.

Phil Fersht, CEO of HfS Research, highlights the 25% tariff as a significant blow to IT services, predicting inflation in the US will force firms to cut back on consulting and IT outsourcing contracts, especially in manufacturing, logistics, and retail sectors.

A recent report by Kotak Institutional Equities notes the uncertainty over the Trump administration's tariff regime has already impacted the demand environment, with significant effects on retail, logistics, and manufacturing. Meanwhile, the hi-tech vertical is balancing future investments in AI with current spending optimizations.

Healthcare remains under pressure as payers face cost constraints and Trump targets big pharma with potential tariffs and changes to drug pricing.