India may just escape the worst of the storm from the recently announced Trump tariffs, according to Neelkanth Mishra, chief economist at Axis Bank.
US President Donald Trump had announced a 10% baseline tariff on all countries, and a 27% duty on Indian imports during his speech at the Rose Garden on "Liberation Day" on Wednesday.
"Three out of the 12 trade groups, which account for 85% of the US imports, will contest the tariffs: Canada, China, and the European Union," Mishra told NDTV Profit, explaining the ripple effects of America's protectionist push. "I believe retaliatory measures will be serious only from China."
The statement was followed by a 34% retaliatory-tariff imposition from China, along with measures like halting imports of poultry products from two American companies, adding 11 American defence companies to an unreliable entity list, imposing export controls on 16 US firms and more.
(Neelkanth Mishra. Photo: NDTV Profit)
(Neelkanth Mishra. Photo: NDTV Profit)
The Trump administration is pursuing three key objectives, according to Mishra. "They do not want the US to pay the cost of maintaining a multilateral world order. They want to generate revenue. And they think the dollar is far too strong, becoming unsustainable, and want to move away from that," said the head of global research at Axis Capital.
While US Treasury Secretary Scott Bessent has tried to soften the blow by saying these tariffs are "just baseline tariffs and are open to negotiation", Mishra pointed out that the concern lies in how countries respond. "Some countries will have no option but to devalue their currency," he added.
From an American lens, the strategy might hold water. "Though this can't be justified economically, it makes sense from America's perspective," Mishra noted.
But what does it mean for global markets? Expect uncertainty, says Mishra. "1–1.5% of world GDP growth can be at risk because for six to nine months, companies will not be clear on what the eventual tariffs are going to be, or what currency exchange rates are going to be."
India: Safe For Now, Watch the Markets
Despite the global tremors, India might remain relatively insulated — at least on the economic front. "Relatively, economic risks to India are the lowest. Only concern is markets," Mishra said.
The Nifty 50 has dropped 1.49% since the tariffs were announced, with the Nifty auto index particularly dropping 2.70% after Trump called for 25% tariffs on foreign automakers.
Looking ahead, the trade shifts could even present an opportunity for India, especially in electronics manufacturing. "On a medium-term basis, if Vietnam isn't bringing down its tariffs, a lot of electronics assembly can start shifting to India."
Mishra expects the monetary policy committee to act decisively next week. "They are very likely to cut rates," he said. "Repo rate may come down to 6%."
RECOMMENDED FOR YOU
India-US Make Final Push For Trade Deal As Tariff Pause Deadline Nears, But Obstacles Remain
Jun 28, 2025
Jerome Powell Reiterates No Rush To Cut As Fed Awaits Tariff Clarity
Jun 24, 2025
Trump Says Again He’ll Set Unilateral Tariffs In Two Weeks
Jun 12, 2025
Trump’s China Gambit Belies Rocky Road Ahead On Tariff Deals
Jun 07, 2025
POPULAR