Donald Trump's Trade Tariffs To Benefit India As Manufacturing Will Shift From China: Mark Mobius

Donald Trump, set to become the next US president, vowed to slap trade tariffs on imports after he returns to the White House. India stands to benefit from these tariffs as they would have the most adverse impact on economic rival China, according to ace investor Mark Mobius.

Trump, during the campaign trail, said he would impose a blanket tariff in the range of 10-20% on all imports and up to 60% on Chinese imports.

If Trump moves ahead with this plan, then a lot of manufacturers would shift out of China to escape the 60% levy of tariffs on their goods in the American market, Mobius said while speaking to NDTV Profit.

"Then, naturally, the next logical place for manufacturing is India because you have a strong population, low-cost labour and software companies that are doing well," said the 88-year-old, who is the founder of Mobius Capital Partners LLP.

Indian exports are bound to "do well" if the US keeps a 60% tariff on imports from China and 10% from elsewhere, Mobius said. "You will see a lot more manufacturing in India in the hardware sector, particularly in semiconductors."

Apart from India, some of the other destinations where manufacturers may shift from China are Mexico and Southeast Asian nations, Mobius said. "The global economy is very flexible. We have supply chains across all parts of the world."

China, in the face of high US tariffs, may reduce the value of its local currency to make its exports competitive, he said. "China may reduce the value of the yuan renminbi by 10% or more. This will be aimed at allowing Chinese exports to go into more countries at a more competitive price."

US Economy To Grow

Trump's policies, including the imposition of tariffs and deregulation, will lead to a spurt in the US economy, according to Mobius. "History shows that high tariffs, at least in the US, bring more income to the federal government. That will allow the federal government to pay the piles of debt."

"The US economy will also witness a resurgence as Trump will bring in significant reforms, including deregulations. Foreign companies in America are affected by a high degree of regulation around the environment, safety, and particularly money flows," Mobius said.

The US economy growing faster will have a ripple effect as well, he suggested, saying, "Usually, what's good for America is also good for the rest of the world in many ways."

Bullish On Indian IT, Pharma

The Indian information technology sector is seen as volatile to the outcome of the presidential election. The Nifty IT index soared by 4% after Trump emerged victorious on Wednesday but slipped 0.68% on Thursday.

Mobius, who is bullish on the Indian IT sector, said Indian firms have begun designing the software for the global semiconductor industry. Going forward, "American companies will be involved in more business in India because of the high availability of talent and low-cost labour,"  he said.

Apart from IT, another Indian sector that is expected to grow in the coming period is pharmaceuticals, according to Mobius. At present, India drugmakers are "doing good with intermediate products that go into final pharma products," but moving ahead, more among them will "move towards final pharmaceutical products," he said.

Indian firms have a strong track record in obtaining approvals from the US Food and Drug Administration, and "this may become easier" in the period to come, Mobius said. These factors make Indian pharmaceuticals "one of the sectors to watch out," he noted.