Stephen Cochrane, Chief Economist for the APAC region at Moody’s Analytics, shared insights on the potential impact of Trump’s tariff policies on India. He emphasised the uncertainty surrounding these tariffs, stating, “It’s hard to know exactly what’s happening.” Cochrane noted that while Trump directed his advisors to identify trade imbalances that could be addressed through tariffs, recent actions have not focused on traditional trade barriers but rather on issues like drug trafficking and immigration.
Cochrane pointed out that India’s trade surplus with the US was approximately $43 billion in 2023, a fraction of China’s substantial $280 billion surplus. This disparity suggests that India may not be the primary target of Trump’s tariff policies. He remarked, “One would expect Trump tariff policies will be more towards countries like China,” which face greater scrutiny due to their larger trade imbalances.
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Moreover, with the possibility of increasing US sanctions on Russia, India may pivot from importing discounted Russian crude to sourcing oil from the US Cochrane warned that this shift could raise India’s import costs, potentially leading to inflationary pressures. He stated, “If the loss of access to that inexpensive Russian crude does mean that there’s a bit of a risk for inflation rising again in India.”
As central banks worldwide monitor inflation and exchange rates, Cochrane expressed scepticism about Trump’s influence on their policies. He noted, “I don’t think central banks will be taking cues from what Trump is doing.” Instead, they will focus on managing their own economic indicators.
In terms of supply chains, Cochrane highlighted that India currently lacks a significant manufacturing platform for Chinese firms compared to countries like Vietnam and Indonesia. However, he suggested that India could emerge as a viable manufacturing hub as companies seek alternatives outside of China. He stated, “There is some potential for India to become a manufacturing platform for intermediate goods.”
As the global economic landscape shifts under Trump’s administration, the ramifications of his tariff strategies will continue to unfold, particularly for nations like India navigating the complexities of trade and inflation in a changing environment.
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