Indian markets, which initially appeared insulated from the impact of US President Donald Trump's potential reciprocal tariffs, are now expected to face a moderate effect, according to Taher Badshah, CIO of Invesco Mutual Fund.
Speaking to NDTV Profit on Feb. 28, Badshah noted that the situation has shifted, with India likely to fall somewhere between the extremes.
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“We'll probably end up somewhere in between. They're not exactly at those extremes on either side. So, I think we will have to, as an industry, as a country, be prepared for some of the industries coming under a little bit of that impact,” he said.
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Concerns over trade tensions resurfaced after US President Donald Trump announced on February 27 plans for new import duties, including a 10% tariff on Chinese goods and additional levies on imports from Mexico and Canada, effective March 4.
Ahead of the US election in November last year, Donald Trump had called India a “big abuser” of trade and had threatened reciprocal tariffs. With his threats against China, Mexico, and Canada now taking shape, India is also weighing its options.
There are speculations that the Indian government may consider measures to reduce tariffs on US imports to mitigate the impact of the expected trade challenges.
Badshah highlighted that a potential tariff resolution will see things calming down in the next few months. “Though the long-term impact is still unclear,” he added.
The top executive emphasised that it will also be important to see how the US economy performs in the aftermath of these events.
While expressing short-term optimism for Indian markets, Badshah acknowledged there was uncertainty around second-order effects and the long-term impact.
“I think we're getting to a stage where the earnings upgrade cycle probably in the US might come to an end and the earnings bot mix cycle in India might probably come to an end in the next few months. And that again is a feature of it, and is a reason why we should incrementally probably start getting positive on the markets from here on.”
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