Sachs said India should maintain balanced relations with all major global players, including China, Russia, Europe, Africa, and the US. He warned that aligning too closely with any one country—especially when that country is unstable or acting unilaterally—can hurt India’s long-term interests.
He also pointed to India’s expectation that it could replace China as a manufacturing hub for US companies. While global firms like Apple are investing in India, Sachs said Trump’s trade philosophy does not support international value chains—whether in China, India, or elsewhere.“He wants to confront China, but his idea is not that India is going to be a massive supplier to the United States, because if that were to happen, and it could very well happen in an open trading regime, the US would turn on India exactly the same way,” Sachs added.
He said Trump’s focus is on bringing manufacturing back to the US, not shifting it to another foreign country. So, even if India expands its exports to the US, it shouldn’t assume that Washington will welcome it.
These are the edited excerpts of the interview.
Q: As you look at these tariffs playing themselves out, what worries you the most today?
A: If something wipes out $10 trillion of market capitalisation in two days, you are probably on the wrong track. The United States is on the path of wrecking the world economy once again. I say once again because the US has a bad habit of wrecking the world economy. It did it in 1930 with tariff increases, the infamous Smoot–Hawley Tariff, which were one of the major provocations that led to the worldwide Great Depression of the 1930s. It did it in 2008, by blundering in its forced bankruptcy of Lehman Brothers on September 14, 2008. And that put the world into a tailspin, the Great Recession.
Now, it’s doing it a third time. This is out of the fervid imagination of one person. This is not US policy. This is not congressional policy. This is not US public policy. This is Donald Trump’s policy. He is single handedly wrecking the world economy and I think the damage is going to be done before it gets undone. We are not in a good situation.
The markets are not the only ones telling us that. We are hearing from business people all over the world that long made value chains, supply chains for critical commodities, for consumer goods, for industrial products, for making automobiles, for making smartphones, you name it, are being profoundly disrupted. We have somebody laughing as the world economy burns, and that is our President. This is not at all a case with the silver lining, unfortunately.
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Q: Let us talk about America. Larry Fink says we are already in a recession. Bill Ackman, one of the biggest supporters of President Trump, says we are headed into a long winter now as far as the economy is concerned. The impact so far has largely been felt in the financial markets. When do you start to see this impact the real economy?
A: If the survey data are correct, we are going to see it in consumer purchases declining sharply in the coming months because consumer sentiments are falling through the floor. That means that we are going to have a significant demand shock in addition to all the multiple supply shocks of disruption of global supply chains. These businessmen expected to be making fortunes at a business-friendly administration. For them to be speaking out after they invested so much money to buy the presidency for this person is also indicative of their state of mind. What we are hearing, again, I am not a short-term macro forecaster, but we are hearing that the odds now are on for a US recession in 2025.
Q: Let us talk about the latest development with respect to China and the President saying that China is going to be tariffed higher, another 50%, which takes the total quantum to over 100%. China says it will retaliate with countermeasures. Do you believe that the possibility of China selling US bonds? It holds about $800 billion in US bonds. There are many in the market who believe that that will be the option of last resort. How do you believe China is likely to play this out?
A: China has been diminishing the share of its foreign exchange reserves held in dollars for several years now. China is not naive when it sees that the US has confiscated the reserves of several countries now in which the US has a geopolitical opposition. The US took and froze, of course, more than $300 billion of Russian reserves, technically in Belgium in Euroclear. The US grabbed the foreign exchange reserves of Venezuela. It did the same for Iran, Afghanistan, and North Korea.
The US weaponised the dollar well before this latest round of trade hand grenades. China already has been diminishing its holdings of dollars. The BRICS have been working on and I hope that they accelerate non-dollar payments because the world’s going to need alternative ways to make payments when you have this kind of obstreperous and unstable government at what is now the core of the payment system in the world.
China definitely will not just sit there with its forex reserves and dollars. Whether it will act abruptly in a reaction or whether it will gradually continue the direction of a sell off, I don’t know. But it will continue in the direction of disgorging itself of US denominated assets.
Q: The question is whether this is the end of American exceptionalism, and you certainly seem to believe that it is. But is it also the end of China’s Isolationism. Has the Trump administration, the unintended consequences of this tariff policy, as well as the way that he is going about addressing friends and foes, will it push people to actually re-engage with China?
A: Well, first, it’s not the end of American exceptionalism and what America is doing is absolutely exceptional, just exceptionally damaging. It is the end of American leadership, I would say, it’s the end of other countries looking to the United States as a stabiliser, as a rule-based order, although that was quite frayed already. But now no one could utter those words with regard to the United States.
Similarly, China was not in any way isolationist. It was the major trade partner of probably 150 countries in the world. But China has aimed for the last decades to be a responsible participant in the international system, not to put its head out too far in leadership. Deng Xiaoping famously advised China – bide your time, keep your head down. We need to rebuild after a long century and a half of economic difficulty, what they call the century of humiliation. Deng Xiaoping said, keep your head down. Now China can’t quite keep its head down. China is under direct attack by the Trump policies and this is one of the core dimensions of the Trump policy part is protecting American economy in a very naive and I think doomed to fail way.
But part of it also is a hostile action vis-à-vis China especially, which is the China must be broken in its global success story because it’s competitor with the United States. China now has to take a more leadership role. China will have to enable the renminbi to play a more international currency role. It has been very gradual, step by step, but it’s going to have to accelerate. China, I think, will accelerate the calls for the BRICS of which, of course, India is a founding crucial member to play a somewhat of a balancing role to the United States in the international scene, especially calling on the BRICS to reinforce their open trade with each other. Because after all, the BRICS is more than 40% of the world economy. It’s about half the world population, it matters a lot. That grouping is going to play a more important role. I believe that China reflected on this and said, we are not going to be bullied, we are not going to be blackmailed. We are not going to be cornered by the United States and so the brawl is very real right now and very dangerous.
Q: As we look at the negotiations that are likely to take shape, President Trump said last night at a dinner that leaders are calling him up and trying to negotiate agreements with the US, including countries like India. What should we be mindful of?
A: Don’t trust that there is going to be some breakthrough. India’s vision is – the US hates China, so India will in a way replace China and the value chains. Companies like Apple or others who are investing heavily in India, they will produce in India rather than producing in China, and they will export to the United States. Don’t count on it. Sounds plausible, but Donald Trump’s idea is to stop international value chains. He says, of course, he is an economic illiterate, but he says that we are going to bring all of that production back home, that the hollowing out of American industry has to end. His idea, yes – he hates China. He wants to confront China, but his idea is not that India is going to be a massive supplier to the United States, because if that were to happen, and it could very well happen in an open trading regime, the US would turn on India exactly the same way.
Q: So, don’t take the relationship for granted.
A: Don’t even expect there to be an agreement this fall, by all means.
Q: The external affairs minister, who was speaking at the summit this morning, said that we have had more engagement with the US in the last few weeks than we have had with the EU in the last few years. He, in fact, went as so far as to say that he doesn’t see a reason why an agreement can’t be in place before fall. You are suggesting that don’t expect that to be the case.
A: I am not disputing his optimism, I am just saying don’t count on this. The US is in turmoil, the US has been likened to China’s cultural revolution in the 1960s. We are in a cultural revolution right now. We are in a political meltdown right now. Very odd, sounds weird, United States doesn’t exactly give that image. But remember that what’s happening is not based on law. It is not based on congressional action. It is not based on public debate. It is not based on public policy. This is a one man show right now. Weird for us, by the way, we don’t have one-person rule in the United States, but people can go online. It is quite interesting and a little frightening to read the executive order which launched this trade war a few days ago says by the powers invested in me as President of the United States and then it lists three emergency actions. I declare an emergency.
Are you kidding? It’s crazy that the United States acts this way. A $30 trillion economy and one person stands up by the emergency powers vested in me, it is nonsense, it is illegal, it is unconstitutional, not only reckless, it is completely against our laws and our constitution. Whether that matters or not, I don’t know.
Q: I want to come back to your point that you were making on India to say that we must not take the US friendship or the relationship for granted, especially as India has its own aspirations of Make in India, it is poised to be the third largest economy, and I go back again to the negotiating table, because the agreement is at this stage in conversation between both sides. What should be the red lines from the India perspective?
A: One overarching point, don’t be played by the United States. Don’t get into the rhetoric by the way which some politicians are using here. In fact, some politicians said in India recently, this is China’s fault. My God, don’t fall into that trap. Don’t do with Trump the words you used to use, that kind of rhetoric to divide India’s role in the world, to play the game of Trump, to believe you are going to have some special relationship with Trump. There are no special relationships with Trump.
Trump has one great love, ‘Donald Trump’– no other and India is not going to be a competing suitor for that. This is quite unpopular in India, but it’s really true. India really needs normal relations with China, and India should appreciate, this a great civilization, and this is a country that’s going to play a huge role in the world in the 21st century. I mean, a huge role in the world on all sorts of things, on culture, on economy, on technology, on global peace, an enormous role. India should play that role respectfully and carefully, and that means good relations with China, with Russia, with Europe. and with Africa. Yes, have good relations with the US, but don’t be played by the US. Don’t be anti-China because that makes the US feel so good and speeds your agreement.
Purely on the economic side, the hostility now inside India to dealing with China in trade is not beneficial for India. India is on the cusp of huge advances in technology. But that’s not against China. China-India tie up, since different sectors would be hugely beneficial here and for China as well. The whole idea that this is an enemy on this side and America is the friend on the other side that is the main thing that I’m really warning against.
The second thing that I want to warn against is, by all means, try to negotiate, but don’t be surprised if it doesn’t work and don’t count on it. Look for multiple options. Don’t think that the rescue point is we cut the deal with the US. Maybe, yes, I think likely no, maybe I will be proved wrong, and I will be happy if I am proved wrong. But don’t count on it. Make a multilateral trading arrangement. Promote trade with the rest of the world, including China, including Russia. Don’t let the United States say, no, no, that one’s against. That is a sanction. Don’t trade with Iran. Don’t trade with Russia. India has been very good at that in the last year.
Also, as a footnote, India’s a little bit been dragging its feet inside the BRICS saying this alternative payments mechanisms, we don’t want to get into that. The Americans don’t like it. We will keep with the dollar and so forth. That’s another related area where India should understand, be careful, don’t depend on the dollar. The rupee should be an international currency. The renminbi should be an international currency. The BRICS should have multi-currency payments mechanisms. The BRICS should not be vulnerable to US unilateral sanctions, which are plainly illegal and plainly destructive. My main point is, India should be a great power, and it should act like one, not taking sides, but rather saying, we need global order and global peace.
Q: What about Congress?
A: Congress is pathetic right now. The problem is Donald Trump came back into office in a system that was already so corrupt that it’s brittle. Why corrupt? Because the 2024 elections had $16 billion changing hands. We are a corrupt political system based on large campaign donations or contribution so-called that are legal but is nothing but corruption. Who bought this government? Elon and his friends in Silicon Valley and some of the Wall Street people. Maybe they have purchasers regret right now, but they bought this election. They paid for it fair and square. They think they own this government. Maybe they don’t really own the government, but the politics are deeply corrupt.
All Congress people care about is their donors. Now, if they are donors, by the way, tell them we got a crazy guy making all of these crazy emergency decrees and this has to stop. It’s possible that Congress will come back to life, but it has been a doormat up until now. The President is taking congressional authority. Article 1, Section 8 of the US Constitution says the tariffs are a congressional responsibility. If you look at Article 2, which defines the President’s responsibilities, believe me, it doesn’t say that the President can set duties or tariffs or taxes – we had a whole revolution against the England on this exact basis, that no one person could set taxation.
But Congress has been completely a doormat up until now. Maybe their donors will start to tell them we don’t like one-person rule, in which case we will start seeing some congress men act.
Q: Democrat Senator Ron Wyden has said that he would push for a vote the issue of tariffs. Do you believe that that could be possibly the pause, the speed breaker in the kind of action that we’re seeing?
A: There are several possible speed breakers. 1 is that the courts could just declare this is completely unconstitutional, which it is, by the way. Yes, a President can have emergency powers if there’s a Category 5 hurricane, if there is a massive forest fire, if the United States is under military attack or terrorist attack, not for 20 years of trade deficit, sorry. That is not an emergency, that is an economic condition. It’s not an emergency. So what Trump has done is plainly illegal and there are some lawsuits starting, and we don’t know whether the judges, many of whom have been appointed by Trump, are going to follow through. So that’s one possible break.
The second possible break is Congress itself. We already saw three Republican senators’ side with the Democrats to vote against the tariffs on Canada because these senators in the Republican side had some particular interest in the Canadian US trade. But it’s a sign that already in the Senate side, at least, there’s a break. Congress is much more pathetic. These people who go every two years for elections, they are really corrupted and pathetic. But maybe on the House side, which is crucial in this there are only a few votes on the Republican side and maybe there are a few honest Republicans who will say we don’t want the whole economy to come crashing down that’s another possible break.
The next possible break, by the way, is I doubt that there’s a single advisor around Trump who really believes in this, other than one crazy guy named Peter Navarro. Other than that, I don’t think the Treasury Secretary believes in this at all. Most of the advisors know that this is completely shambolic and reckless. They are making excuses, it’s very hard to contradict the boss in general, but it’s very hard to contradict Trump in particular. But Elon Musk, he was our Prime Minister at least for the first three months of the year. He is saying that it makes no sense. We should have a zero for zero. I don’t know how much longer Musk is going to last in Washington. He is going to go back to SpaceX and Tesla, I am pretty sure pretty quickly. But inside, everybody knows this is reckless, but nobody tells the boss, they are all afraid, but maybe something will prevail inside.
Q: Before I let you go, Donald Trump has come up with a new term, the ‘panican’, I would imagine that you would be squarely put in that camp by him. Are you not concerned about the fact that you are very vocally criticising the Trump administration’s policies?
A: The world is 8 billion people. We have got a lot of challenges. We can’t have one-person rule in the world, in my country. We have had one of my students dragged off out of his house a couple of weeks ago by unmarked police so called without a judicial warrant, and this student is still in detention in Louisiana, the courts haven’t even issued a writ of habeas corpus yet. It’s shocking to me. His wife is eight and a half months pregnant right now. We can’t have one-person rule in this world. We can’t tolerate it. We can’t play the game. We can’t humour craziness. We have to be straightforward adults. This is my view of things.
