Auto, steel, chemical sectors in Asia face pressure from evolving US tariff policies: Moody’s

Companies in the automotive, steel, chemicals and business-services sectors in South and Southeast Asia face significant exposure to evolving US policies, including higher tariffs that could raise costs and reduce demand, Moody’s Ratings said in a report on March 17.

By contrast, industries such as mining, oil and gas, shipping, investment holding companies and agriculture are less vulnerable to these trade measures, thanks to strong domestic operations, diversified supply chains, or direct US operations, the ratings agency noted.

Auto-parts suppliers and luxury carmakers selling to the US — either directly or via Canada and Mexico — would be hit by tariffs. However, the extent of the impact depends on how much of the cost they can pass on to consumers. Moody’s expects auto-parts maker Samvardhana Motherson International Ltd. to shift higher costs onto customers, but Tata Motors Ltd. may struggle to do so. Jaguar Land Rover, Tata Motors’ subsidiary, derives nearly a third of its sales from the US and could see demand fall if tariffs rise, especially since all JLR vehicles sold in the US are produced in the EU or UK — regions that could also face higher tariffs.

Steel and chemical companies will see minimal direct effects from the proposed US tariffs but could suffer from an influx of surplus steel and petrochemicals into Asia, worsening the already high supply and depressing prices. For JSW Steel Ltd, the impact is somewhat cushioned as its US operations contribute only about 7% of revenue. Similarly, UPL Corp Ltd’s geographically diverse operations are expected to help absorb the impact.

Indian IT firms like Tata Consultancy Services Ltd (TCS) and Infosys Ltd are well-positioned to handle cost pressures from changing US policies, thanks to their strong profitability. However, the sector remains exposed to shifts in US immigration rules, which could shrink the talent pool for companies relying on foreign workers. To mitigate risks, firms such as TCS, Infosys, and Hexaware Technologies Ltd. have ramped up onshore hiring in the US.

Meanwhile, escalating trade restrictions could slow global growth, reducing energy demand and pushing down commodity prices, Moody’s warned. This could weigh on mining and oil and gas firms. Reliance Industries Ltd., which exports about half of its oil-to-chemicals output, could face indirect risks from global trade disruptions. Still, its strong balance sheet is expected to absorb any declines in demand or profits. State-owned Oil and Natural Gas Corp. Ltd., which serves mainly the Indian market, remains shielded from direct tariff impacts.

Sectors such as property development, real estate investment trusts, telecommunications, and gaming are largely insulated from US policy shifts, as their businesses are primarily domestic, Moody’s added.