As global markets parse US President Donald Trump’s latest tariff announcements, experts suggest that India could emerge as a relative beneficiary amid the trade recalibrations underway. While 14 countries, including major Asian economies like Japan, Korea, and Malaysia, received letters indicating tariffs of up to 30%, India was notably absent from the list.According to Rob Subbaraman, Head of Global Macro Research at Nomura Singapore, “India did not get a letter… that does suggest a deal could be very close and potentially quite positive for India.”
The executive order accompanying the tariff letters, which does carry the force of law, pushes the effective date of these tariffs to August 1. Markets have taken this as a sign that there may be room for negotiations in the interim. Subbaraman said, “This gives more wiggle room for deals… potentially another case of Trump escalating to de-escalate.”
Against this backdrop, India’s macroeconomic fundamentals appear favourable. With growth expected above 6% and inflation below 4%, Subbaraman said, “This is a very good combination for India.” Nomura is currently forecasting FY26 growth at 6.2% and expects the Reserve Bank of India (RBI) to cut rates twice more this year, in September and December, on the back of benign inflation trends. “We think inflation is no longer an issue in India,” he added, pointing out that it is currently below 3%.Also Read: Gautam Duggad of Motilal Oswal bets on discretionary, midcaps & defence in FY26 playbookOne area of optimism for India is trade diversion, especially if US tariffs on Indian goods settle at or near 10%. Subbaraman argued this would make India an attractive hub for multinational manufacturing. “India is in a strong position to become a bigger manufacturing hub… toys, textiles, footwear, electronics,” he said, noting that the absence of India in the initial list of tariff targets reinforces that opportunity.However, not all emerging markets (EMs) may fare as well. Subbaraman warned that the export outlook for EM Asia is dimming after a wave of front-loaded shipments to beat potential US tariffs. “There’s been front-loading of exports… there will be payback from that,” he said.
Chandresh Jain, Rates and FX Strategist for EM Asia at BNP Paribas believes that markets have already absorbed much of the negative news from the US fiscal bill and are now watching the Federal Reserve. “Market is pricing about two cuts for this year… but in our view, no cuts for 2025,” Jain said. BNP Paribas expects inflation in the US to rise in the second half of the year due to tariff-related pressures. “The Fed will want to remain on hold… and only cut in 2026,” Jain added.On the bond side, he expects US 10-year yields to drift slightly lower, ending the year around 4.25%, with further moderation to 4–4.10% in 2026. This view contrasts with market expectations of imminent Fed easing and highlights a divergence in outlook. Jain also pointed to dollar weakness, driven by two significant flows: hedging by current account surplus countries and diversification by global investors. “People are thinking about what else they can buy apart from US assets,” he said, predicting that the US Dollar Index (DXY) index could fall another 3–4% over the next year.Also Read: Consumption revival underway across India, say Parle and Bizom executivesRegarding the Indian rupee, Jain stated that despite a generally weaker dollar, the rupee may not outperform other currencies like the euro. “Dollar-INR will come down, but it will not be the outperformer,” he said. Factors such as India’s current account deficit, limited bond inflows, and seasonal outflows like dividends and defence purchases will cap INR gains.Still, Subbaraman sees further rupee strength ahead. “We think dollar-INR can go a bit below 84 by the end of the year,” he said, highlighting that India’s real interest rates remain attractive relative to peers, even with expected RBI rate cuts.Also Read: Milken Institute’s William Lee on why the US is reshaping trade, not retreating & where India fits inAddressing the unpredictability of US trade policy under Trump, Subbaraman said, “The uncertainty definitely looms.” He added, “At the moment, it looks like the US tariff rate on China is over 50%… India, with a large domestic market, is in a pretty good place.” While stating that non-tariff barriers and policy volatility could be obstacles, he remains optimistic about India’s medium-term potential, especially if it can maintain policy stability and benefit from the shifting dynamics in global trade.For the entire discussion, watch the accompanying videoCatch all the latest updates from the stock market here
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