The great wall of tariffs: How Trump’s trade war is reshaping India’s IT channel

When former US President Donald Trump imposed aggressive tariffs on Chinese goods, the tremors travelled far beyond Washington and Beijing. For India’s IT channel, the Trump trade tariff war turned into both a challenge and an opportunity.

While global supply chains scrambled for alternatives, India quietly emerged as a credible destination for manufacturing, assembly, and IT services delivery. The shift isn’t merely about tariff avoidance; it’s about risk diversification, resilience, and rebalancing of global trade.

In an insightful conversation with DQ Channels, Veera Swamy Meka (Veeru), Managing Director, Srilakshmi Innovations, shares how the tariff storm has pushed Indian IT players to rethink sourcing, services, and strategy.

A long-term supply chain shift, not a passing phase

“The trade war has accelerated a shift that was already in motion,” says Meka. “While some adjustments may look tactical, the broader trend is structural. Global vendors are actively diversifying away from China to hedge geopolitical risk.”

India, he believes, is positioned for long-term gains. “With the government’s Production Linked Incentive (PLI) schemes and expanding electronics manufacturing base, India is becoming a credible alternative hub,” he adds.

This isn’t just a tariff story, it’s a strategic reset of the global IT supply chain. The focus is on risk mitigation, market access, and long-term resilience.

Hardware margins shrink, services take centre stage

The tariff environment has increased the landed costs of imported hardware, and that has quietly altered the economics of the Indian IT channel. “Hardware remains essential, but the profitability has moved toward services,” explains Meka.

He notes that many partners are recalibrating their business mix, shifting from hardware-heavy portfolios to managed services, cloud migration, and cybersecurity offerings. “Margins in services are healthier, recurring, and less tariff-sensitive,” he says.

The cost conundrum: to pass or to absorb

How do Indian IT players handle rising input costs? Meka’s view is pragmatic. “It depends on the segment,” he explains. “Large enterprises, where IT is mission-critical, are willing to accept higher costs if the rationale is transparent.”

But for smaller clients, the approach is different. “In the SME and mid-market segments, margins are thin, so channel partners often absorb part of the hit to retain competitiveness,” he adds. Most adopt a hybrid model, passing on some costs, negotiating with vendors, and absorbing the rest to preserve long-term relationships.

Customer sentiment: from caution to cautious optimism

“The initial reaction was definitely caution,” says Meka. “Some projects were deferred as customers reassessed budgets and timelines.”

However, he points out that digital transformation and cloud adoption have kept demand resilient. “Customers now see IT as an enabler, not an optional expense. What changed is their buying pattern, longer evaluation cycles, a preference for OPEX models, and demand for flexible financing,” he notes.

Instead of a slowdown, the channel is witnessing a shift in spending models from upfront purchases to consumption-based services.

Smarter inventory and sourcing models emerge

Rising costs have forced Indian partners to become leaner and more agile. “We’ve seen many channel players reduce bulky inventories and adopt just-in-time or vendor-managed inventory systems,” Meka explains.

He adds, “There’s also a big move toward alternate sourcing, from Vietnam, Taiwan, and increasingly, India itself. The focus is now on agility: shorter cycles, multi-country sourcing, and tighter working capital control.”

Geopolitics beyond US tariffs: the new tech order

“Tariffs are only part of the picture,” Meka emphasises. “The broader US–China tension has created the ‘China+1 strategy’, where companies prefer to have at least one alternative manufacturing or service destination.”

Visa restrictions and data sovereignty rules are also influencing global IT operations. “The US visa tightening led Indian firms to hire more locally overseas. At the same time, new data protection laws in India and Europe are reshaping how companies design IT architecture and compliance frameworks,” he observes.

Together, these forces - trade, talent, and data governance are reshaping the global IT business far beyond the tariff debate.

Conclusion: India’s moment to rise amid realignment

As the dust settles on Trump’s trade war, it’s clear that the impact on India’s IT channel is deeper than short-term disruption. It has accelerated the structural shift toward service-led growth, smarter sourcing, and regional diversification.

For veterans like Veera Swamy Meka, this is not just a market adjustment but a generational opportunity. “India’s channel ecosystem has shown resilience and agility,” he says. “We’re not just surviving the tariff shocks, we’re using them to redefine how global IT business gets done.”

The Great Wall of Tariffs, it seems, may have blocked some trade routes, but for India, it has opened new corridors of innovation and independence.

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