Trump's tariff shock: Zoho’s Sridhar Vembu warns India must rethink IT reliance as US firms will buckle under strain

As the ripple effects of Donald Trump’s tariff war continue to reshape global trade, Zoho founder Sridhar Vembu has sounded a cautionary note for India. In a detailed commentary on X, Vembu warned that declining profit margins in US corporations — squeezed by tariffs and shifting manufacturing priorities — will force a rethink on IT spending. For India, heavily reliant on IT exports, that spells trouble.

“Longer term the 'screw factory' and the 'toaster factory' will return to the US,” Vembu posted on X (formerly Twitter), referring to a potential reshoring of manufacturing. “But the short term pain can be quite severe. For many smaller imported-parts-dependent manufacturers the short term pain could prove fatal, as Balaji explains.”

He pointed out that the stock market is already showing signs of strain, with inflated valuations retreating to last year’s levels. “Corporate profit margins will take a hit and that will impact the stock market,” Vembu said.

Taking a broader view, Vembu added, “Rebuilding manufacturing in America will also spell the end of extreme financialization — hedge fund quants have to become mechanical engineers. That kind of change takes a generation, not 6 months.”

The message for India, he emphasised, is urgent: “We have to wean ourselves from dependence on IT services exports, because so much of it was going to care and feed inefficient IT systems in America. Lower corporate margins will mean large US corporations will be forced to look at IT spending carefully.”

He concluded with a stark reminder: “The last 30 years do not give us a lot of insight about the next 30 years. We have to look much further back in history for lessons.”

The original post by Balaji, which sparked the exchange, painted a grim picture of what tariffs mean for US manufacturers. He described how a 30% tariff on imported parts turns a $200k profit into a $100k loss — forcing companies into debt, layoffs, or quality compromises. “These tariffs don’t really give an incentive to build in the US,” he wrote. “Instead what they likely mean is debt, layoffs, lower quality, and higher prices for any US company that buys parts abroad.”

In response to Vembu’s post, Balaji added, “The long-term for the US is decades away, at best, because it's at the precipice of a USSR-like collapse.”

He further argued that the US economy is distorted by Keynesian policies and that the “poorer the country and less dependent it is on US supply chains, the better it will be able to deal with what is to come.”