Trump’s administration imposed 25% tariffs on imports from Canada and Mexico, and 10% on China, sparking a global trade shift. Investor Mark Mobius warned of long-term economic impacts but suggested India could benefit by opening its markets to U.S. goods.
India’s Response: Budget 2025-26
India’s customs duty rationalization aims to:
Boost domestic manufacturing under Aatmanirbhar Bharat.
Make raw materials cheaper for MSMEs.
Encourage high-value exports by lowering input costs.
Notably, tariffs on Harley Davidson bikes were reduced ahead of Modi’s U.S. visit, signaling improved Indo-U.S. trade ties.
Key Impacts on India
Manufacturing Gains:
China Plus One strategy could boost Indian exports.
However, supply chain disruptions may drive inflation.
Stock Market & FII Outflows:
Strong U.S. dollar caused ₹1.78 lakh crore equity outflows.
Retail investors are holding up markets, but weak earnings pose risks.
Trade Diversion:
U.S. importers may shift to India, benefiting exporters.
Risk of cheap imports flooding India as affected countries offload goods.
Currency Volatility:
Rupee fell from ₹83.8 to ₹87.16/USD, raising import costs.
Forex reserves dropped to $629.56B, increasing inflation risks.
Weaker rupee could make Indian exports more competitive.
Future Trade Relations:
India was not targeted by Trump’s tariffs, opening U.S. trade opportunities.
Diplomatic leverage could secure better trade agreements.
Conclusion
India faces both risks and opportunities:
Opportunities: Becoming a manufacturing hub, stronger U.S. ties, export boost.
To navigate uncertainties, India must strengthen domestic manufacturing, balance monetary policy, and leverage trade negotiations. With strategic planning, India can emerge stronger in the shifting trade landscape.
Additionally, Rupees drops to its low time all at Rs.87 per USD, marking a 0.6% decline from Friday and a 4% depreciation since October. The slide comes as global markets react to U.S. President Donald Trump’s trade tariffs on Canada, Mexico, and China, escalating fears of a trade war.
Despite being a relatively stable EM currency in recent years, analysts predict further depreciation due to:
Foreign investor outflows amid slowing Indian growth.
Stronger U.S. dollar, fueled by policy uncertainty.
Retaliatory tariffs from affected nations, increasing market volatility.
While a weaker rupee makes Indian exports more competitive, it also raises import costs and inflation risks. The coming weeks will be crucial as India navigates currency pressures and shifting global trade dynamics.
What do you think - do we need to open our economy more to shield from US tariffs?
One key pattern to note is that
there are completely opposite possibilities listed in most of the “Key Impacts on India” section.
This is also highlighted by the conclusion that mentions “both risks and oppurtunities” exist.
Agreed. What’s actionable at an individual level is probably to expect relatively higher volatility in the markets in the near future (or is it priced-in already?) and prepare to benefit from investment/trading patterns that do well in times of higher uncertainity.
Well @cvs one thing that I’ll have to give you, is that you articulate your thoughts pretty neatly and subjects structurally. Can you help me with some books and stuff that can help me with that?
U.S. President Donald Trump has suspended steep tariffs on Canada and Mexico for 30 days in exchange for commitments to strengthen border security and combat organized crime. Canadian PM Justin Trudeau and Mexican President Claudia Sheinbaum agreed to bolster enforcement, with Canada deploying new technology and Mexico sending 10,000 National Guard troops to its northern border.
Despite this pause, U.S. tariffs on China remain set to take effect, with Trump warning of further hikes if fentanyl trafficking isn’t addressed. China has vowed to challenge the tariffs but remains open to talks.
The Canadian dollar surged on the news, and U.S. stock futures rebounded after market losses. Meanwhile, Trump hinted at potential tariffs on the EU but suggested Britain might be spared. Analysts warn that prolonged tariffs could disrupt supply chains and trigger economic downturns in North America.
I cannot think of one book as such that led to this style of writing.
I would attribute this style of writing to
the 1Lac+ email-threads that i have read/responded to, often with folks across multiple time-zones.
As any additional back-n-forth on such emails would result in another 24-hours delay to reach the conclusion,
over time, the writing style got optimized for what it is right now.
Also, as the written-word is almost always the most cost-effective means of communication,
a preference for the written-word (over other means of communication) has helped hone this as well.
From a historical perspective,
the impact of the “shock to the system” is likely NOT going to be as easy to revert.
Trump’s policies mark a return to the United States’ pre-1930s geoeconomic approach when it regularly imposed duties on its imports.
This strategy reached its apex with the Smoot-Hawley Tariff Act of 1930. This law, enacted just as the world was sliding into the Great Depression, increased tariffs on over 20,000 imported products. The response was swift and severe: dozens of countries imposed their own tariffs, and global trade plummeted by 60%.
Apparenlty, one way economists view this behaviour is - The US is voluntarily relinquishing its de-facto leadership position in a USD-denominated global economy. Which opens up an opportunity for the global economy to be centred around another nation (or a consortium of nations) to step in as the de-facto leader in the new world order. Until then, the general consensus is - Volatility/uncertainty galore!