India’s IT Sector Faces Existential Crisis: Will Donald Trump’s Tariffs Spark Mass Layoffs?

President Donald Trump has imposed fresh tariffs on India, citing unfair trade practices. The new measures include a 10% baseline tariff on all countries and a 26% levy on Indian goods entering the US.

According to a March 25 report by Emkay Global, a 25% broad tariff could wipe out $31 billion from India’s GDP , amounting to roughly 0.72% of the total GDP. The impact is particularly concerning as the US remains India's largest export destination, with total exports reaching $77.5 billion in FY24.

Speaking at the "Make American Wealthy Again" event in the Rose Garden, Trump criticized India’s trade policies. "India very, very tough. The Prime Minister just left and is a great friend of mine, but you are not treating us right. They charge us 52 per cent and we charge them almost nothing," he stated.
 

IT Sector Faces Hiring Slowdown Amid Tariff Uncertainty
While the tariffs directly impact trade, India’s IT sector—one of the biggest service exporters to the US—is feeling the heat. Already grappling with weak hiring momentum and sluggish demand, the sector may face deeper slowdowns if US clients cut spending due to economic uncertainty and tariff-related cost escalations.

According to the Emkay Global report, hiring in IT services has remained stagnant, with the Naukri JobSpeak Index declining 2.5% YoY and 8% MoM in March 2025. The BPO/ITES sector also took a hit, falling 7.5% YoY, reflecting a pause in IT job market recovery. Hiring growth is expected to remain on a ‘need’ basis, with companies focusing on improving workforce utilization rather than expanding headcount.

With uncertainty over US tariffs and fears of a slowdown or recession, many IT firms are cautious about discretionary spending and new hiring. Large-cap players like TCS, Infosys, and Wipro have prioritized freshers as part of their cost optimization strategy, announcing plans to hire 40,000, 20,000, and 10,000-12,000 freshers, respectively, in FY26.

Could This Lead to India's Biggest IT Layoffs?
Industry leaders are already voicing concerns over potential job losses. Rakesh Nayak, an IT entrepreneur, painted a grim picture of what lies ahead. "If Trump applies even a 20% tariff on software imports from India, we will have no other option but to lay off all our employees in India. This will be the first layoff in our 16-year history," he posted on social media.

 

Another industry voice echoed the sentiment, predicting a historic downturn. "People have been laid off after the dot-com bust, subprime crisis, etc., but this will be the biggest ever," a user commented online.

A Domino Effect on India's Economy?
The impact of these layoffs could extend far beyond the IT sector. India is a major recipient of foreign capital and remittances, and job losses in tech could weaken consumer spending and economic growth. Some experts warn that this could be a repeat of previous financial crises but on an even larger scale.
As uncertainty looms, Indian IT companies and policymakers will need to strategize their next steps. The big question now is: How will the industry navigate this unexpected storm?