Trump Tariffs & India: 'More Noise Than Substance' For 'Best EM', Says Julius Baer's Mark Matthews

US President Donald Trump has announced 25% tariffs on goods from Japan and South Korea, starting August 1. The Trump administration, on Monday, also sent letters to other trading partners such as Thailand, Bangladesh, Malaysia, among Asian nations. In the run-up to more tariff updates, India awaits its trade deal with the world's largest economy after months of negotiation.

While D-Street investors remain on edge for the fine print of the deal, the Indian stock market has baked in the tariff-factor ahead of the first quarter earnings results. However, should investors be worried about Trump tariffs? What will be the likely impact of tariffs on the Indian economy?

Speaking to NDTV Profit in an exclusive interview on Tuesday, July 8, Mark Matthews, Managing Director, Head of Research, Asia Pacific at Bank Julius Baer & Co. Ltd, believes that India will withstand Trump tariffs and will not suffer any major economic 'impact' over very little exposure to US exports.

Matthews explained that since the Indian stock market is almost at an all time high, Trump ''probably feels more confident doing it now" than when the market was just 1% away from hitting a bear market in April.

According to the market veteran, South Korea and Japan export a lot to the US and hence the first tariffs letters are sent only to the Asian countries. "However, even if Trump forces Japan to open their market to American rice, I doubt the Japanese consumers will buy it in stores," said the Julius Baer expert.

The % of South Korean and Japanese economies derived from goods exported to the US is "fairly large", but India's is merely 2%—very small, claimed Matthews. "So for India, tariffs are more noise than substance and not too impactful for the Indian economy," Matthews told NDTV Profit.

India's total exports reached a record high of $824.9 billion in FY25, marking a 6.01% increase from the previous year. However, earlier this year, government data showed that the US remained India's largest trading partner in FY25 with the bilateral trade valued at $131.4 billion.

Even if the US levies a 26% tariff on exports of Indian goods to the US, it will "not matter to India", claimed Matthew. "Exports to the US are a very small part of the Indian economy and certainly not what drives it," he said.

While speaking to NDTV Profit, the expert pointed out that the global view on the Indian market does not change even if the trade deal materializes. According to Matthews, earnings move the Indian markets and the latest forecast is pegged to be in single digit for the impending results in Q1FY26.

However, we have a few outliers surprising to the upside like in metals, India may even report double-digit earnings. Matthews is confident of a 'double-digit' earnings growth in the coming quarters. Earlier, the Reserve Bank of India (RBI) was very hawkish and the government was not spending much. Now, the central bank is dovish and the earnings growth will percolate through the economy, predicts Matthews.

"I don't see much that will take the Indian market down unless there's a large global correction because India is sensitive to world markets," said the expert. Coming to sectors, the expert has a positive outlook on the Indian IT sector. "The outlook was gloomy just a few months ago as the online betting platforms were suggesting 70% probability of the US entering into a recession. Now that's down to 20%," said Matthews.

Apart from housing data, data from the US is now favorable, hence, the outlook in the US "looks better''. Matthews noted that the outlook is not reflected in the commentary from Indian IT firms and that he expects them to start speaking positively about their operations in the US.

The Julius Baer expert concluded that from a three-year view, India will remain the best emerging market (EM) in the world as it stands to receive inflows. "The EM asset class has been a terrible place to invest in last 10-30 years; however, India has proven track record of returns," said Matthews.