Saturday, August 2, 2025

India-US may negotiate tariff relief; RBI could cut rates if growth slows: JPMorgan’s Aziz

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Jahangir Aziz, Head of Emerging Market Economics Research at JPMorgan believes India and the US will explore ways to lower current tariff levels.“25% is pretty high,” Aziz said, referring to current US tariff rates. “Let’s not forget, there’s a penalty on top of that.”

He expects India’s Reserve Bank of India (RBI) to consider rate cuts again if economic conditions soften.

Also Read | Why India’s top fund managers aren’t losing sleep over US tariffsAziz warned that tariffs are contributing to inflation pressures in the US. Core inflation could rise to over 6% annualised by August or September. In June, goods inflation in the US excluding autos ran at an annualised pace of 6.8%.

He also highlighted the growing burden of tariffs on consumers and businesses. The observed tariff rate – actual duties collected divided by total imports – reached 9.5–10% in June, up from 2% in December. “That has to either get absorbed in lower profit or higher prices. So there is pain already there in the system,” Aziz said.

Based on current monthly trends, Aziz estimated that the US could collect around $350 billion in tariffs annually, effectively acting as a consumption tax.

Also Read | Will US tariffs hurt Tata Steel? CEO TV Narendran breaks it down

On India’s monetary policy, Aziz noted that while the RBI delivered a 100-basis-point rate cut last year, there is no further easing in the baseline scenario. “We don’t have a rate cut anymore. We have things on hold,” he said. But he added, “If growth slows, and if you don’t get a spike in core inflation, the space gets opened up.”

Aziz believes the RBI may act in response to global cues, especially from the US Federal Reserve. “If you get a rate cut signal from the Fed… that would be a good point at which the RBI can hang its act on that,” he said, suggesting a possible return to rate cuts or more liquidity support if conditions warrant it.

For the full interview, watch the accompanying video

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