Lots of developments overnight. US President Donald Trump has now slapped tariffs ranging anywhere between 25% to 40% on several countries globally. Also, there is an important statement which he has made where he says that we are close to making a deal with India. How do you read this and what does this mean for Indian markets and global markets?
Arvind Sanger: Well, clearly, the US markets were off a little bit today because of this news about new round of tariffs or reinstatement of the old tariffs in some countries. Luckily, there is time till August one, so the markets did not fall too badly. They fell a little bit 70 bps, 70 basis points in the US S&P 500.
But from an Indian market standpoint, it is good news. It is now the second or third time in the last few days that President Trump has tweeted that a deal with India is closed. So, hopefully, there is some common ground quickly found and India becomes… There has been a couple of countries that have signed deals.
Again, these are all not very detailed but broad outlines. UK has signed one a few weeks ago and then last week, I think, it was Vietnam that signed a deal and now India seems to be lining up and I will be good. It will remove some of the uncertainty, but the reality is with President Trump nothing seems to be permanent and even if India signs a deal now who knows what might come up in the future.
But getting some reasonable framework is clearly going to be a relief for the Indian market because unpredictability is worse than predictability even if the predictability means a little more tariffs and frankly India opening up its economy in some sectors which it may not have been willing to otherwise is long-term very good for the Indian economy’s health in terms of making it more competitive and more open.
Now with these reciprocal tariff deadline, it has now been extended to August 1st for implementation. What do you feel are the chances that it may be walked back or negotiated again before implementation because yet again the deadline has been pushed and just like you were mentioning nothing is really permanent with the US president.
Arvind Sanger: Yes, I mean, there is no question in my mind that President Trump does not want the kind of tariff turmoil that we saw after the April 2nd, it was announcement. So, clearly, there is no desire to have that kind of uncertainty and market turmoil and economic risk.
So, what President Trump is doing is trying to put some numbers out there to as they say focus the mind of some of these countries like Korea and Japan to name the two most prominent ones, of the ones named in today’s set of new tariffs announced and so if that helps focus the minds of both sides to try to get a deal, there is some time.
But my sense is what President Trump and his team are realising is that it is easy to announce these big negotiations, but these negotiations are tough and there is a reason why trade talks take years. And these guys are trying to compress it in weeks. So, I would not count on August one as the last final chance. Maybe it is, but maybe it is not.
So far, as we have discovered from the taco kind of name that Trump has been given, I do not think he is interested in causing huge economic turmoil. Short-term a little bit is okay, but he is now looking for deals.
As far as the tariff deadline is concerned and you are saying that perhaps 1 August could not be the last deadline, but what kind of impact will this have over the next one month on both American markets as well as Indian markets? Yesterday, we reacted negatively, but as you mentioned, it could have been worse had the deadline not been extended till August 1. But now going forward for the next one month or at least till the 1st of August, what kind of course will US markets and back home Indian markets follow for the next few days.
Arvind Sanger: Well, assuming that there are deals coming from India and maybe EU and maybe a couple of other countries, then the US markets should settle down and not be too unsettled. But if these promised deals keep getting pushed and pushed to the right and the fear grows that who knows what is coming, then the markets could remain unsettled.
My hope and assumption is that India and maybe EU are on track to do deals in the near future in the next few days, hopefully by the end of the week. And if that happens, then to be more specific about the Indian markets should do fine.
The focus really tariffs is in my opinion a sideshow once we get whatever the tariffs are, some deal on the table, the real issue for the Indian markets is going to be the monsoons are fine, but the economic fundamentals whether it is auto sales growth or other short duration factors that we look at, the data is not extremely encouraging in terms of a strong earnings quarter ahead of us.
So, I think that the earnings will and the commentary from the corporates will be determining more importantly in my opinion as to what Indian markets do in the coming weeks rather than the tariff news.
