India uses us in Trump's tariff plan

This report comes from the “Inside India” bulletin this week, which brings timely, insightful news and market comments about the emerging power and great companies behind its meteoric growth. How do you see what you see? You can subscribe Here.

While the US will impose tariffs on the import of goods that they include 56.1% of the total export of IndiaUntil now, the services have not been targeted. Some of the largest companies in India, such as TCS AND InfosysIt is unlikely that this is directly affected by the tariffs and can be exposed to the problem indirectly, if the global economic slowdown took place, given that most of their clients are based abroad.

India's Export Destinations for Merchandise are also significantly diversified, with the us accounting for only 18% of Shipments in 2023-2024, According to India's Minister of Commerce & Industry.

“The structure of trade from India to the United States is very different than, let's say that China as an example, because of the component of services,” said James Sullivan, head of Asia Pacific Equity Research in JPmorgan, CNBC Squawk Box Asia. “The US administration almost completely focuses on trade in goods, and not on trade in services in which the United States has a surplus.”

“If this narrative begins to change, we must recognize that the vast majority of Indian exports to the United States are IT services,” added Sullivan. “These actions were significant due to the risk of recession in the United States and the lack of corporate expenditure, which would then reach the highest IT line.”

While India has some strengths, the task facing Indian negotiators will probably be more difficult by competitors staring at a much worse scenario.

China is currently in the face of a total tariff rate of 125% (at the time of this pressing of the keys), while the Vietnamese risk is imposed on 46% of “mutual” import duties – imposed by the US.

Their economic susceptibility, because export to the USA is a large part of GDP, led to divergent answers. While China decided to answer with remedies

“I just had a very productive call to Lam, Secretary General of the Communist Party of Vietnam, who told me that Vietnam wants to lower the features to zero, if they are able to conclude an agreement with the USA”, Trump published on the social networks of Truth Social I X Shortly after the tariff program unveiling.

On Wednesday, the Secretary of Treasury Scott Bessent, who conducts commercial negotiations, revealed that he was meeting trade negotiators in Vietnam that day.

Vietnam offered a preventively offered tariffs for agriculture and energy imports from the USA after exposing the tariffs, it went further, promising to buy air products, defensive and security from the USA

The point is that Vietnam throws a sink in terms of tariffs and is willing to trade free. However, this movement can also encourage other nations to compete, offering the US even more favorable trade conditions.

In a short period, while Apple Apparently, I plan to send more iPhones to the USA in India to compensate for steep tariffs to China, Cupertino management may also wonder if the zero tariffs in Vietnam-if there is a contract-it is a better plant than India.

It would be natural that companies think that at least 26% of India tariffs are better than 125% tariff for China, 0% of the Vietnam tariffs would be even better. And this school of thinking will also not be limited to California.

Japanese electronics manufacturer Sourcenext Corp This week, it announced plans to set up a new factory in Vietnam after its existing facility in China became impractical for exports to the USA

At first glance, this may seem to threaten the current relatively favorable position of India in the USA

“Although India wants to have their own solution for the IT production industry (US-WIEGNA agreement) will certainly affect its (negotiations) from the USA,” said Mark Marrytrosian, director of Aubrey Capital Capital, CNBC at Inside India. “Remember that a bang always forgives those who are charming. Those who meet longer, make him lick chops.”

Aubrey's Global emerging markets fund It has 32% assignment to China and 30% allocation to India.

However, from a distance from the race to the lower to the lower tariffs, Martyrosian believes that India has a lever during negotiations with the USA, indicating that export in goods is a small percentage of the general economy of India. This means that Indian commercial negotiators dealing with the US will rather not have a mandate for common concessions similar to Vietnam.

Others agree.

“The situation of the tariffs is still developing, but India is relatively well placed due to the low dependence on the export of goods, and therefore can have some flexibility in developing its final position,” said Abhiram Eleswan, head of India action at BNP Paribas. “Most sectors in India derive less than 10% of their export revenues to the USA, with the exception of IT services and pharmaceuticals.”

“India will not be compromise in some areas, such as agriculture, and therefore are in a better negotiating position,” said Gaurav Narain, the main adviser at the London Capital India growth fund.

“My own sense is that India will try to balance a negative commercial balance … by committing to higher imports in areas such as pus / defense, etc., it can, however, reduce the tariffs to 0% in many areas, such as pharmaceuticals and cars, in which India has a very well developed, cheap production base, and imports would only be from Premium products.”

Narain added that even in a short period India will see the “limited influence” of the tariffs, because supply chains cannot be easily changed, as in the case of Apple.

“I think that companies will undertake a long-term, structural approach to the abolition of their supply chains. India has the advantage that they are not perceived as simply a redirect from China, which works in his favor,” Narain added.

For investors in Indian actions, the market is less forgiving. In addition to tariff turbulence, supplies in India are still considered too expensive because of their lofty valuations.

“Estimates of earnings still require lower reset,” said Aditya Suresh, head of India Equity Research, in Macquarie Capital. “We think that the worst is and we could see influence in the coming months.”

Suresh also suggested that investors can hide from current turbulence by investing in actions that derive most of their revenues locally, instead of exporters with large capitalization. The Macquarie analyst said that he favors the telecommunications company Bharti airtelOil and gas company GailAND Ultratsz cement As long as the dust falls.

The India Reserve Bank lowers rates. On Wednesday, India Central Bank lower the policy rate by 25 base points to 6%marking its lowest level from September 2022, because concerns about the growth of sport in the fifth largest economy in the world. The reduction of the rate was consistent with the expectations of Reuters analysts. RBI also reduced its expectations for growth for a budget year 2025-26 to 6.5% from 6.7%.

The “optimistic” forecast by the RBI. Mridul Saggar, a professor of economics at the Indian Business School Iim Kozhikode and former executive director of the RBI, said that the country Growth can be about 6% this year And he called the RBI projection “optimist”.

. The Indian government expects it to achieve the goal of growth. Despite the disturbances caused by Trump'S Tariffs, India probably hit Forecast gross domestic product expansion by 6.3%-6.8% -Nura from the economic research of the India government in January-in the budget year 2025–26, the Indian official of the Ministry of Finance, which spoke provided anonymity, said on Monday.

Tariffs for European Union cars can be reduced. According to the Reuters of the Citing Source, the Indian government of Prime Minister Narendra Modi is considering reducing his Tariffs for the import of an EU car up to 10% from 100% in stages. However, domestic car manufacturers want a 30% tariff minimum, and the obligations of electric vehicles remained unchanged at 110%.

Indian supplies fell on Thursday, throwing a trend in Asian actions. . Nifty 50 The indicator closed lower by 0.6%, guided by a loss of 2.2% this week. This year the index has fallen by 5.3%.

The 10-year profitability of Indian government bonds dropped slightly to 6.43%, by 3 base points from last week.

On CNBC TV this week Pranjul Bhandari, the main economist of HSBC, estimated that 26% of Trump tariffs on India can The goal is 0.5 percentage points from the country's economic growth. If global trade patterns change, such as China, which export more goods to India, it can also harm the Indian production sector. “Bandari added that we felt direct or indirectly that height would need help” in the next few quarters.

Meanwhile, Sonal Varma, the Chief Economist of Nomura in India and Asia ex-Japan, said they exist two factors Making a portfolio and direct investments in India attractive. First of all, the difference in the rank of tariffs between India and China is based on India, which “would make sense” for international companies to redirect its production to India. Secondly, India is a US strategic ally and cooperate with the world's largest economy over long -term commercial plans.