BCA Research strategist explains the bigger picture behind US reciprocal tariffs on India

Marko Papic, Chief Strategist at BCA Research, explained in an interview with CNBC-TV18 why the US is using reciprocal tariffs instead of direct tariffs on India.He said that if the goal was simply to generate revenue for the US government, a direct and steep tariff could have been imposed. “Reciprocal is an interesting choice, because it suggests that the intention here is not to permanently impose tariffs on the rest of the world, but get the rest of the world to lower their tariffs on US and in return US will lower its tariffs on rest of the world.”

The idea that these tariffs will remain in place permanently is fading. Papic also noted that double-digit tariffs across borders would have serious consequences for the global economy.

He expects the US market to face a downturn due to concerns over fiscal spending and tariffs. Fiscal spending is not going to be what investors thought and so some of the expectations of US leapfrogging the rest of the world are falling flat.The focus has shifted to other regions like Europe, Asia, and Japan, while the US lags behind with the dollar possibly reaching its peak.

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“DOGE emails to federal government workers and bureaucrats, that is also feeding this expectation that fiscal policy will not be as stimulative. If you are cutting jobs into government, you are also probably going to struggle to pass a very profligate, very huge bill that will expand the deficit and that is taking the wind out of the sails of the US economy a little bit,” he added.

Papic believes India has the potential to outperform the US if fiscal policy in the US weakens and tariffs remain a negotiation tool.

“If the dollar comes down, that is beneficial for Indian assets, especially given their under-performance and a mini sell off.”

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