US Administration's Tariffs

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The US Administration’s Tariffs on India: Services Largely Unaffected, But Ripple Effects Expected

On July 30, President Donald Trump announced that the US will impose a 25% tariff on imports from India starting August 1. While the announcement appears focused entirely on goods – and there’s no mention of services – it has already sparked concern among enterprise stakeholders sourcing IT and BPO services from India.

Let’s be clear: IT, BPO, and digital services are not covered by the announced tariffs. Historically, services have been excluded from tariff frameworks due to their intangible nature and the practical difficulty of regulating their flow across borders. Services are delivered through people, platforms, or digital networks – not shipping containers. As Everest Group analysts have consistently noted, tariffs have almost always targeted physical goods.

However, anxiety is inevitable. These headlines grab attention, blur the lines between goods and services, and – rightly – prompt enterprises to reexamine their global delivery risk exposure. While there is no direct action against IT or BPO, the implications go beyond the obvious.

Here's what to watch:

Spillover sentiment

Buyers who rely on tariff-affected sectors like auto parts, pharmaceutical ingredients, electronics, textiles, or chemicals may face pressure on cost structures. That could trickle down into more cautious discretionary spending, including on tech and tech services.
Non-people cost impacts

While delivery centers and staff remain untouched, some input costs may see modest inflation. Tariff-driven increases in the price of imported hardware, telecom equipment, or facility infrastructure could slightly raise the cost to serve. That said, these effects are likely to be marginal and manageable.
India’s response

The bigger watchpoint may be how India reacts. If it chooses to revisit transfer pricing norms, introduce new IP taxation, or tighten digital rules, that could materially impact how multinationals operate and account for profits in India, especially in the services sector.
The optics factor

In the broader narrative, the line between goods and services is not always well understood, especially in boardrooms and media coverage. While services aren’t tariffed, they aren’t immune to sentiment shocks.

So, should leaders worry? Not really. Should they be alert and ready? Absolutely. Use this moment to validate your cost models and global delivery mix, check exposure concentration, and pre-empt stakeholder questions with a clear, fact-based point of view.

As always, the real value lies not in reacting to headlines but in anticipating what comes next. Reach out if you want to talk to our analysts.

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The impact of tariffs on the global services market

Tariffs on global services appear unlikely, especially for the tech services industry, which may largely escape direct impact.

However, tariffs are expected to negatively impact demand for services across most of the affected industries, driven by cuts in discretionary spending and revenue compression in non-discretionary areas due to broader economic strain.

The degree of the impact will vary by the industry of services buyers.

Learn more about the tariff impacts on industries:

Read the report

Anticipated commercial impacts to IT service provider pricing

Companies are likely to face budget constraints due to reduced demand and rising costs, which could limit overall IT spending. Pricing for standard IT service provider skills may decline. However, demand for advanced IT service provider capabilities may grow as firms pursue tech-driven cost reduction. Customer experience management may also see increased investment to help retain customers despite higher prices.

Two-phase impact on the global services market

The impact of tariffs is expected to unfold in two phases.

In the near term:

Non-essential and discretionary spending is likely to decline. This includes reduced spending on outsourcing, consulting, and other professional services.

In the medium term:

Businesses are likely to adapt through cost optimization, diversifying suppliers, and increasing automation. These changes could ultimately create new growth opportunities for services providers.

The forecast for global services: three scenarios and associated growth

Everest Group foresees three plausible scenarios for service provider market impact in 2025 after reciprocal tariffs are imposed.

We also anticipate that reciprocal tariffs will pose a significant barrier to growth in the global services market, potentially preventing meaningful recovery from an already weak 2024.

How Everest Group can help

At Everest Group, our analysts are closely tracking how global tech and services markets are responding to the impact of tariffs, and our evolving outlooks will be shared with members.

Beyond our membership content, analysts are available to help on specific projects or on a workshop basis.

Buyers of services
If you are a buyer of IT and outsourcing services, we can help you:
- Assess the need to update outsourcing (IT/BPO/tech) and workforce playbooks
- Model impacts to services pricing for various scenarios and levers to mitigate cost increases
- Shift service provider portfolios to mitigate impacts
Service providers
If you are an IT or outsourcing service provider, we can help you:
- Develop future roadmaps for growth opportunities and competitive positioning across geographies and industry verticals
- Navigate rapidly evolving market share benchmarking and analysis to keep you ahead of the market dynamics and the competition
- Develop growth playbooks for specific portfolios