US President Donald Trump announced a 27% reciprocal tariff on India, citing its alleged 52% levy on US imports. While the Indian government called it a "mixed bag," key sectors like pharmaceuticals, semiconductors, copper, and critical minerals remain exempt. Trump, despite praising PM Modi as a "great friend," urged global tariff reductions, claiming unfair treatment by India.
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00:00Let's try and make a sense of what President Trump did overnight so we have a full sense
00:04of what's really happened, the India specific exemptions that have also been rolled out
00:10and then we'll try and dissect how this impacts us.
00:13So American President Donald Trump put out his tariff plan late last night, India time.
00:20Trump slammed what he called discounted tariffs on multiple countries including India.
00:26The American President has announced 26% reciprocal tariffs on India in return for India allegedly
00:33imposing a 52% tariff on US imports.
00:36Trump called Prime Minister Modi a great friend.
00:39Trump says India's tariffs are tough and they've not been treating the United States right.
00:44In the first response from the Indian government, the Indian government said the tariffs are
00:48a mixed bag, not a setback and that India will address concerns with the United States.
00:54There's no important silver lining for India.
00:57Several key sectors are exempted from tariffs.
01:00This includes pharma products, semiconductor chips, copper, lumber articles and critical minerals.
01:06Trump told the world that they need to reduce tariffs as much as possible and is basically
01:10pushing for countries like India to reduce tariffs.
01:13So try and make sense of what's at play, how this impacts the India growth story, how this
01:19impacts different sectors of the Indian economy that export to the United States and how this
01:23impacts global growth and American growth and then the impact on Indian growth.
01:27We'll talk about all of that.
01:28I want to go across to a business that is here, Dasitha Dharabi, who joins us this morning.
01:32Siddharth, try and give our viewers a sense of the impact on Indian consumers, on Indian
01:39companies of the tariffs that Donald Trump rolled out late last night.
01:44Well, morning Rahul and clearly while President Trump talks about liberation day, one wonders
01:52whether he's kind of set in place the first of a major recession in his very first year
01:58in government, because clearly the tariffs are very sweeping.
02:04And I would start by saying that there is no reciprocity in the basic concept, because
02:10remember how they are stacked up.
02:12There is a 10 percent uniform tariff across the globe, across everything.
02:17So that's for starters.
02:19So even countries, including those that do not levy any import tariffs on U.S. goods
02:26now have gone from zero straight away to 10 percent.
02:30That's the first slab.
02:31The second slab is country specific.
02:34And if you see that stack that he held up, India is ranked 10th on that list in terms
02:40of the percentage of duties that he proposes to impose.
02:46The very calculation, Rahul, of how this percentage has been calculated, for example,
02:53the number that was bandied about for India, includes tariffs, which are import duties
03:01and domestic taxes like GST, or what is called overseas the value added tax.
03:07Now, this is confounding economists because you can't club them together.
03:12GST is applicable both on domestic as well as, you know, all kinds of production.
03:18So let's leave that math aside.
03:20The big impact for India really is that I would say it's an opportunity.
03:25Why do I say that?
03:26There are two points.
03:27The first you mentioned, pharmaceuticals as an exemption, he's not doing it to do any
03:32favor to India.
03:34It's basically because of the realization that the US and its huge medical burden would
03:42suffer if pharmaceuticals became expensive.
03:45Copper, semiconductors, energy, these are very core and critical to the US economy,
03:52including lumber.
03:53Houses in the United States are made of timber.
03:58So he's been very, very case specific with regard to the exemptions.
04:02There is a silver lining for one or two sectors for India.
04:05But there is an opportunity, Rahul, and I'll quickly summarize it before I talk it back
04:09to you.
04:11Look at the tariffs on countries like Vietnam, on Bangladesh, and other East Asian tigers
04:19who have built up their economies in a free world trade order at the cost of Indian exports.
04:27If you look at it vis-a-vis them, our exports, assuming that there will be a full absorption
04:33of the 26 percent levy, will be more cheaper.
04:37And look at what will happen to the currency.
04:39Therefore, there is an opportunity for India.
04:42And finally, we know that with the advanced level of conversation between India and the
04:47United States, and we are among the few countries who have put a formal BIT with the United
04:53States on the table, I think there is a silver lining beyond the short term pain, Rahul.
05:04I want to get some experts from both the United States and India to talk about the impact
05:10of these Trump tariffs.
05:11But before I do that, I want to give you a flavor in case you missed that press conference
05:14late at night.
05:15I want to give you a flavor of what Donald Trump said in what he described as liberation
05:21days.
05:22Remember, the last time an American president tried protectionist tariffs was way back in
05:261930.
05:28This is when the Great Depression was already on and those protectionist measures actually
05:32worsened the global depression.
05:36And therefore, what Trump is doing, all economic literature suggests, is counterproductive.
05:41It doesn't work.
05:42But it makes for good politics amongst his MAGA supporters and that's why Trump is pushing
05:46through.
05:47He's convinced he's doing the right thing.
05:49Every sensible person, every economist, though, convinced that this is going to be disastrous.
05:53So let's listen to President Trump and then we'll try and make sense of the impact this
05:57is likely to have on countries like India.
06:00India, very, very tough, very, very tough.
06:05The prime minister just left and he's a great friend of mine.
06:08But I said, you're a friend of mine, but you're not treating us right.
06:12They charge us 52 percent.
06:13You have to understand, we charge them almost nothing for years and years.
06:18The United States charges other countries only a 2.4 tariff on motorcycles.
06:24Meanwhile, Thailand and others are charging much higher prices, like 60 percent.
06:31India charges 70 percent.
06:33Vietnam charges 75 percent and others are even higher than that.
06:38Likewise, until today, the United States has for decades charged a 2.5 tariff.
06:45South Korea, that 2.5 percent on foreign made automobiles.
06:50The European Union charges us more than 10 percent tariffs, and they have 20 percent.
06:57That's much, much higher.
06:59India charges 70 percent and perhaps worst of all are the non-monetary restrictions imposed
07:04by South Korea, Japan and very many other nations.
07:08As a result of these colossal trade barriers, 81 percent of the cars in South Korea made
07:15in South Korea, 94 percent of the cars in Japan are made in Japan.
07:21Toyota sells one million foreign made automobiles into the United States and General Motors
07:27sells almost none.
07:29Ford sells very little.
07:30None of our companies are allowed to go into other countries.
07:35Likewise, to all of the foreign presidents, prime ministers, kings, queens, ambassadors
07:40and everyone else who will soon be calling to ask for exemptions from these tariffs,
07:45I say terminate your own tariffs, drop your barriers.
07:50Don't manipulate your currencies.
07:52They manipulate their currencies like nobody can even believe, which is a bad, bad thing
07:58and very devastating to us.
08:00And start buying tens of billions of dollars of American goods.
08:04Tariffs give our country protection against those that would do us economic harm.
08:08And many people were looking to do us economic harm, maybe not so obviously, but they were
08:16doing tremendous economic harm.
08:19But even more importantly, they will give us growth.
08:22These tariffs are going to give us growth like you haven't seen before.
08:25We were I call this kind reciprocal.
08:28This is not full reciprocal.
08:30This is kind reciprocal.
08:32But what we do is we cut it in half.
08:35We charge them.
08:36My answer is very simple.
08:37If they complain, if you want your tariff rate to be zero, then you build your product
08:42right here in America, because there is no tariff.
08:45If you build your plant, your product in America, they blame former presidents and past leaders
08:51who weren't doing their job.
08:52They let it happen and they let it happen to an extent that nobody can even believe.
08:57That's why effective at midnight, we will impose a 25 percent tariff on all foreign
09:02made automobiles.
09:07OK, we're joined on this broadcast once again by Professor Andrew Latham.
09:14He's a distinguished scholar of international security at the Malcastro College.
09:19I have Arun Sharma.
09:20He is a senior nonresident fellow chair on India and emerging Asian economies at CSIS.
09:27I have Sushant Sareen from the Observer Research Foundation and I have PN Vijay, who's an investment
09:32banker and has worked closely in different capacities with this government.
09:35I have Rohit Sharma joining us from Washington, D.C.
09:38I want to go across to our colleague Rohit first.
09:40Rohit, what's been the buzz in the U.S. media on the back of this big dramatic press conference?
09:46I saw Goldman Sachs has increased the probability of America going into recession.
09:50So the general sense amongst all banks, investment houses, economists, is that this is disastrous
09:57for the U.S. economy in terms of growth.
09:59And yet Trump seems determined to bash on.
10:02Absolutely.
10:03I think, you know, JPMorgan analysts, I think they came up with a report and they said,
10:08you know, U.S. will probably go into recession.
10:11They gave a 40 percent chance of us going into recession.
10:15They said it's probably going to hike taxes on Americans by $660 billion a year.
10:20And, you know, Donald Trump has not listened to anybody on this.
10:24I think he wanted to do this for the last 40 years by his own admission.
10:28He said he was a young, young guy when he first talked about it.
10:31So I think, you know, all in all, he wanted to give it a shot.
10:34He wanted to give it a try.
10:35I mean, people are talking about how they've calculated tariffs.
10:38You know, it's the formula is out there and it's not even like it's not even reciprocal
10:44at this point in time is what, you know, some of the other stuff come out and said.
10:47So I think in general public media, people are confused, apprehensions, anxious.
10:54We do not know what the stock markets will look like tomorrow morning.
10:57And in all sincerity, even some party members, you know, are trying to come out and showing
11:04signs of especially the ones who are going to probably go to election next year, showing
11:07signs of anxiousness as to what this would lead to now.
11:11One of the things in the executive order is that he can rescind these tariffs when
11:16he wants to.
11:17But from the looks of it and what he said before, is that he would want to give it a
11:22shot in the long run.
11:23He thinks they can raise $6 trillion over the next 10 years.
11:27And this will probably bring back manufacturing jobs into America and trying to play into
11:31the politics, the domestic politics of America.
11:34He also believes this would also allow America to reduce the deficit.
11:39So nobody knows this is an uncharted territory, but Donald Trump and his cabinet believes
11:44in it.
11:45And as far as American media is concerned, Rahul, we've not seen too much positive coverage
11:50at this point in time.
11:51Rohit Sharma, I'll leave it there.
11:55Thank you for joining us.
11:56Professor Andrew Latham, I benefited from your insights when we spoke before Donald
12:00Trump announced these tariffs and you said it's impossible to get into the man's head.
12:04Now that we've seen what he's announced.
12:07Can you just begin by explaining to everyone watching what you think is the most likely
12:12impact on the American economy?
12:15Donald Trump thinks this will bring manufacturing back to the United States.
12:19A lot of economists are convinced that it won't.
12:22Explain why you think these tariffs might or might not work.
12:26Professor Latham.
12:27Well, they won't work because they're premised on a false assumption and frankly, economic
12:35illiteracy.
12:37This is not 1913 and it's not 1930, it's 2025.
12:42And these tariffs, whether they're merely a bargaining chip, sometimes he frames it
12:47that way.
12:49But at a deeper level, President Trump is framing this as we're going to create a tariff
12:55walls that will bring manufacturing back to the United States.
13:01But he seems to think this is going to happen in the next three or four months, which is
13:03why he keeps giving a month reprieve and another month reprieve as if you can stand
13:08up a factory to manufacture automobile parts in 30 days.
13:14It's completely ridiculous.
13:16And then the other silly slash scary assumption he's making is that somehow he can do away
13:24with the income tax and replace it with the income from tariffs, which was Hamilton's
13:31view back in 1913.
13:33The difference is back in 1913, of course, the federal government was basically the armed
13:39forces and the post office.
13:41You could finance it that way.
13:44But this federal government in the United States is huge.
13:47You cannot finance it through tariffs and doing away with income tax and corporate taxes
13:53and whatnot.
13:56And he came into office making a promise.
14:00He was going to reduce taxes.
14:04He was going to improve, enhance the sort of cost of living six trillion dollars over
14:1110 years, which is what he's talking about in terms of the tariffs, in fact, is a tax.
14:17And every time you hear the word tariff, you need to hear the word tax as well.
14:22This is a six trillion dollar tax increase his base.
14:27They're going to cheer him in the short term.
14:29Professor Latham, a lot of economists are saying that this is going to lead America
14:34into recession.
14:36What is the probability in your view of America slipping into recession?
14:40How soon is this likely to happen if America slips into recession?
14:43What is the impact in your view on global growth and the consequential impact on the
14:48growth of countries like India?
14:50We're already seeing the stock market taking a nosedive.
14:55We're likely to see Americans pulling back in terms of purchasing things, buying things.
15:01That's going to result in a contraction of the American economy.
15:05That's bad for Americans, but it's also bad for the world because this country is a huge
15:11market.
15:14And if the market contracts as it's going to, as it's already started to, it's going
15:19to have a huge impact not just on the United States and American citizens, but on Indians
15:24and Canadians and Europeans and Thais, and I could obviously go on.
15:30Everybody who sells into the U.S. is going to find a much smaller marketplace.
15:36And that in fact, in turn rather, is going to have an impact on their own domestic production.
15:42If you're selling pineapples to the United States and Americans are buying fewer pineapples,
15:48that's going to have a negative impact on your economy.
15:55Sushant Sareen, you've been studying, you know, the potential impact of Trump's tariffs.
16:01For everyone watching this morning, try and explain how this is likely to impact Indian
16:06companies exporting to the U.S.
16:08Rahul, I'm guessing that the people, can you hear me, Rahul?
16:18Can you hear me?
16:21I hear you well.
16:22Okay.
16:23So, Rahul, it depends upon the various companies that are exporting to the United States.
16:28I'm sure they're going to be, you know, bringing out their calculators.
16:31Now, we don't know whether these tariffs are an across the board 26 percent tariff, which
16:36is being levied, or is it going to be differentiated according to different sectors.
16:41But I think at one level, to the extent that it impacts upon U.S. demand, and the demand
16:48goes down, it will have some impact.
16:53But I think in relative terms, because these tariffs are not just on India, but they're
16:57on all the countries.
16:58So for example, if you're exporting textiles or garments to the United States, the tariffs
17:05on the Bangladeshis are, I believe, 37 percent now.
17:08On the Pakistanis, about 29 percent.
17:11These are also big exporters to the United States.
17:14India is just 26 percent.
17:16So maybe there are some margins out there for us.
17:19On Vietnam, it goes up to almost 40, 44 percent or thereabouts.
17:23So it, you know, maybe there is space for us.
17:27And our dilemma will be the same as the U.S. dilemma.
17:30Just because Donald Trump is imposing massive tariffs on his major trade partners, does
17:37that mean, as Professor Latham was saying, does that mean that manufacturing will go
17:41back?
17:42Maybe some manufacturing will go back, but will the Americans start manufacturing garments
17:46from tomorrow?
17:47Right?
17:49Will the Americans do that?
17:50Will they start manufacturing Nike shoes from tomorrow or any of those other U.S. companies
17:53which have invested in factories abroad and using low manufacturing base, which is basic
18:01common economics 101, that as a nation becomes advanced technologically, it moves up the
18:08value chain and things which are lower down the value chain move to other countries, which
18:14is what happened in China, for example.
18:16The Chinese didn't start making high tech stuff when they started off their economic
18:21reforms program.
18:22They have now moved over the last 7, 8, 10 years, they moved into the high tech and really
18:28advanced economic stuff, engineering goods.
18:31They didn't move out there overnight.
18:33Can the U.S. now go back down the value chain?
18:36I don't think that's going to be possible.
18:38So it's certainly going to impact upon the U.S. market demand in the U.S. because the
18:44cost of things will go up.
18:47But how does it disrupt international trade?
18:50And to the extent that it disrupts international trade, there will be an impact on us because
18:55almost 45, 46 percent of Indian GDP comes from foreign trade.
19:00And if foreign trade across the globe is going to get disrupted really badly, and it is going
19:06to get disrupted, I think that's a no-brainer, then certainly it will have some deleterious
19:11effects on the Indian economy and Indian companies as well.
19:16But I don't think it is a single dimensional thing.
19:20The tariffs have gone up and so the Indian companies are going to be in a lot of trouble.
19:23I'm sure, you know, given the kind of stupidity which happens in stock markets, where suddenly
19:30sentiments lead to massive rises or spikes and massive falls, probably the stock markets
19:35are going to take a beating today.
19:37But I don't think in the aggregate, it's going to have a very, very significant impact
19:43on the Indian economy itself, simply because we are not alone in this.
19:47There are many other…
19:48I want to give our viewers a framework on how to think about this.
19:51There are two kinds of broad exports, right?
19:55One is, say, business to business, B2B.
19:57If it's B2B, then the margins typically, and we're speaking to some leading likes
20:01of India Inc. who made this point, that the margins typically in B2B exports are thinner
20:06and therefore the ability to absorb the extra tariffs are lesser because it's extremely
20:10competitive.
20:11But if you have, say, some kind of B2C, business to consumer exports, which are directly to
20:17the consumer, there the prospects of being able to increase the price at which you sell
20:23might be higher because you've got some flexibility there because you're selling
20:27directly to the consumer and especially if your brands have some salience.
20:30But if you're in the B2B sector, then it really squeezes your margins even further
20:35and the ability to increase prices is not that flexible.
20:38Arun Sharma, you know, what are you hearing about conversations between Lucknick, the
20:43US Commerce Secretary, our Commerce Minister, Piyush Goyal, the US Trade Representative,
20:47our commerce officials, in terms of trying to get the bilateral trade agreement done
20:52before fall?
20:53Is that likely to happen?
20:54If it does, how might that impact the tariffs that Trump announced last night?
20:58Well, thank you for the opportunity, Rahul.
21:02There is one good, I would say, omen for India that Mr. Lucknick is serious about the discussions.
21:10The fact that he participated, I guess, in Yorkon Club, you know, a few weeks ago, the
21:15fact that President Trump went out of his way to reiterate his friendship with Prime
21:20Minister Modi, the fact that India is one of the few bright spots in terms of friendly
21:25relations the United States has with large countries, I think all augur well.
21:31But there is also the reality of national interest.
21:36The Commerce Ministry came out, I guess, this morning, saying that we are analyzing this
21:4127.
21:42And they also gave a very important signal that we should not ignore.
21:45They said it is a mixed bag, not a setback.
21:49I think that we have to read a very positive, and I would say, promising message there,
21:55that clearly the backline conversations are not catastrophic by any means, and certainly
22:02not of the attitude and the reaction that the closest allies of the United States have
22:09had with this.
22:10You know, Prime Minister Karni said, look, we are going to take forceful and decisive
22:13countermeasures.
22:14Australia said this is not an act of a friend.
22:17You know, multiple other countries have, and close allies of the United States have come
22:21back with very strong reactions.
22:24India has not.
22:25And I think that is probably a pretty good signal to us who are not involved in the direct
22:30conversations on taking a more positive view on how this progress towards bilateral trade
22:36agreement will evolve.
22:38The other thing that's, I think, important to analyze is that there is a different level
22:44of tariff in different sectors, that what we call the tariff gap between the difference
22:50between what certain sectors face already versus what they will now face.
22:56And I think that's something that also gives some positive indication of what really matters
23:03is which are the sectors that are high export and which are low.
23:09For example, you know, Prime Minister Modi was very smart, in my view, in saying, fine,
23:13we'll reduce the road duty on Harley motorcycles.
23:17How many Harleys are bought by India?
23:19So what impact does that make on an overall basis?
23:22So I think it's very important also to get a little micro into the analysis as to how
23:26much are we exporting to India in which sector, and what is the exact tariff gap that's going
23:31to be impacting when the new tariffs take place.
23:35There was a sense or there was a hope in some sectors that because of the equation between
23:41Prime Minister Modi and American President Trump, that India would somehow be able to
23:45avoid these tariffs, also because India was moving with speed, already reducing some
23:50taxes during the budget, signalling that it was willing to reduce more, we were hoping
23:55at one level to stave off, the more realistic people in government knew that that's not
23:59going to happen.
24:00But there was an expectation that we may be able to stave off these taxes.
24:02That hasn't happened.
24:04Do you see that as being a setback to those who are trying to ensure that India would
24:10be exempted from Trump's tariffs?
24:11No, I think that was an unrealistic expectation.
24:14I'm not at all surprised that India was not expected.
24:16There was no way in which, you know, a president who has made this an article of faith in his
24:23policy and his approach, where he has imposed tariffs on his closest allies like Canada,
24:30Mexico, who are part of NAFTA, and he's torn up that agreement.
24:35So he was not going to make that change just for the sake of goodwill alone.
24:39There is a strategic relationship and where the exemptions are needed for the United States,
24:44he has made them.
24:45You know, pharma is a big example.
24:46He cannot afford to increase the price of essential drugs in the United States.
24:51It's a political suicide.
24:52He's not going to do that.
24:54Similarly, critical minerals, I mean, you cannot afford this, you know, tech industry
25:00to collapse because of the lack of critical minerals.
25:03So where the exemptions had to be made, they've already been made.
25:07I think now it's a question of really, where do we go from here?
25:10And that's going to be a line by line, hard negotiation between Secretary Lutnick and
25:15team and the USTR and the Indian Commerce Ministry as we go forward.
25:19So I guess we all have to stay tuned.
25:23So PN Vijay, it's a very tricky situation for India to be in.
25:27On the one side, Donald Trump keeps saying Prime Minister Modi is my friend.
25:31India is very tough.
25:32They charge us too many tariffs.
25:34And while he makes exemptions for what is politically important for him, like critical
25:39minerals and the pharmaceutical sector, he wants India to reduce that USTR, US Trade
25:45Representative Report, when it spoke of non-tariff barriers, spoke of India having to, they were
25:51objecting to minimum support price on food grains, on food products, which are impossible
25:56for any government to reduce.
25:57So he's being politically expedient himself and pushing India towards the wall on what
26:02he thinks is important for American companies are dealing with a mercantilist.
26:10Mr. Vijay.
26:12Good morning.
26:13I think we need to dimension this problem without getting too excited about it.
26:18We exported about $85 billion of goods last year to the US.
26:24And if you take away pharmaceuticals and energy products, it works out to about $60 billion.
26:29So 25% of that will be about $15 to $20 billion, which was less than half percent of India's
26:35GDP.
26:37So if one is talking about the impact on Indian exports to the US, it is much less than for
26:45say China, South Korea, Japan, Vietnam, or Bangladesh, or practically anybody else, which
26:51is why if you saw the stock market, the stock market has literally shrugged this off, losing
26:56less than half a percent after the good rise they had yesterday.
26:59Now, the bigger issue here is, I think, that what does India do from here?
27:06And I think it's a great opportunity for India, because we have a situation where at least
27:12in the headlines, people are worried, though, frankly, I think a bad monsoon will be much,
27:17much more devastating to the Indian economy than this impact on less than 0.5% of the
27:23GDP.
27:24But there is an impact effect.
27:25People are having special stories about it.
27:27People are talking about it.
27:29So the Indian government can push through what it claims to do, which is ease of doing
27:33business, reducing unnecessary procedures, taxes, etc., which are good for the country.
27:41After all, why do we need so many of this?
27:43Finally, where is the Indian consumer?
27:45People talk so much about the American consumer.
27:47What about the Indian consumer?
27:49Of course, the Indian consumer stands to gain when these tariffs are down.
27:54And I think the mature response of the Indian government was good.
27:58It said, it's not a setback, we are looking at it.
28:01I think we should negotiate with the Americans.
28:04And as a policy, bring down the tariffs and non-tariff barriers, the QRs, etc., to make
28:09ourselves globally competitive.
28:11And I think it can be a win-win for us.
28:13And I do not share the views of people who think it is a disaster for India.
28:18It is not at all.
28:19And I think there's more as an opportunity to set up...
28:23No, but let me push back, because the thinking in government, PN Vijay, so far was, we need
28:27to build an Atman Nirbhar Bharat, we need to encourage domestic manufacturing, which
28:31is why a lot of Indian automobile manufacturers were encouraged to set up plants for electronic,
28:36for EV cars, EV motorcycles.
28:39And they did that.
28:40Whether it's the Tatas, the Mahindras, the JSW, several groups did that.
28:44Now suddenly, if you reduce import duties on EVs, and Teslas become cheaper, BYDs become
28:50cheaper, then all these companies that have spent so much money in building these capacities,
28:54hoping to cash in on Prime Minister Modi's make in India Atman Nirbhar Bharat push, now
28:59because you're trying to cozy up to the likes of Elon Musk and make him calm down.
29:06That's very problematic.
29:07Rahul, 95% of cars sold in India are less than 15 lakhs.
29:14You think Tesla coming to India is going to affect the Indian automobile industry?
29:18Are we joking?
29:19You think Burbombe coming into India is going to affect the Indian automobile industry?
29:22No, but BYD will.
29:23No, no, no.
29:24BYD will.
29:25If BYD can...
29:26Sir, look at what's happening.
29:27No, no, no.
29:28That's not fair.
29:29Look at what's happened in Europe.
29:30Look at what's happening elsewhere, where Tesla is being impacted.
29:33Companies like BYD can sell high tech at low cost.
29:37And if they're allowed to, if those cars can be imported into India with very low import
29:41duties, which is what Tesla is pushing for, you can't make a Tesla specific exemption.
29:45If it happens, then it's kind of available to all companies.
29:47And that's where the challenge is starting.
29:49That's the real concern India, the Indian government needs to look at.
29:52You know, BYD, Hyundai is already there.
29:55If you see global prices of Hyundai EVs and BYD, it's almost the same.
29:59So we already have Tata's producing the EVs.
30:02BYD is very good for the Indian consumer.
30:05Why don't we look at it this way?
30:08Sure.
30:09Yeah, it's good for Indian consumer.
30:14But Siddharth, I want to bring you into this.
30:16The fact is, I'm just saying that you've been pushing in one direction.
30:19You've been signaling to Indian automobile manufacturers, for example, that double down
30:24on Aakman Nirbhar Bharat, make in India.
30:27And they've done that.
30:28They've put in real capacity expansion plans and built up these manufacturing facilities.
30:32And now suddenly, because of reasons beyond the control of the Indian government, there
30:36is pressure to reduce taxes.
30:37And the fact is, if a Mahindra car is competing with a much cheaper BYD car, for the consumer,
30:43it's great.
30:44But the fact is that to build these capacities is problematic.
30:46Well, you know, Rahul, the way I would like to answer this question is that what's the
30:52broader picture here, sector by sector?
30:54And we are already getting analysis.
30:56If we take a look at the markets, pharma stocks are obviously reacting positively to the fact
31:01that pharmaceutical exports have been exempted.
31:03We are seeing a broader reaction, as was just mentioned, which is far more mature than the
31:09earlier fears of a complete washout.
31:12But to your question, for the first two Modi terms, we clearly had a policy of import substitution
31:22under the rubric of make in India.
31:25Within the last three, four months, we have seen the government of India being completely
31:29cognizant and aware of the changing terms of trade that President Trump was going to
31:36usher in.
31:37And this is just, I think, one of the key chapters of a battle that will continue to
31:42play out.
31:43Therefore, for the government of India and our domestic producers, the challenge is to
31:48move away from relying on tariffs as a tool to get import substitution done.
31:55Laptops, mobile phones, electronics, you know, there are so many categories.
31:59We have not been able to do import substitution in crude oil or gold, for that matter.
32:05Global initiatives with regard to reducing our dependence on gold imports have not really
32:10succeeded.
32:11So the net effect is that we are now, almost 35 years after India and Indian companies
32:18started to gain from the world trade order, a rules-based order of negotiated trade interactions
32:26and a global pact, we will now have to move towards bilateral trade agreements.
32:31It is every country for itself and every sector for itself.
32:36And wherever there are sectors in our economy where, to your point, Rahul, which have been
32:42benefiting from the fact that foreigners and foreign producers have been hit with higher
32:48tariffs, they will have to pull up their socks.
32:50And one final point, I think some of the tonality in what the US is doing has been very unfair
32:57to India.
32:58And why do I say that?
32:59India, in terms of our foreign direct investment rules, is amongst the most open economies
33:05in the world.
33:06And it is surprising that the USTR has perhaps not fully absorbed that.
33:12Compare it with China.
33:13We are one of the most open economies, insurance being one of the latest examples.
33:19Import tariffs were for protecting our domestic economy.
33:23The fundamental error in the US way of thinking is that all companies will move to the US.
33:29I think what you have seen, including the most recent rapprochement or signals of that
33:33with China, it will be every country fending for itself.
33:38And that is going to be the new world trade order after the disorder that Trump has introduced.
33:47I want to talk about a new Nomura research report that's put out.
33:51This looks at the impact on the Indian IT sector.
33:55They've reduced target prices of several of the Indian IT stocks between 3 and 21 percent,
34:01saying that sales growth for large IT companies could be cut by about 230 to 350 basis points.
34:09Tariffs, Nomura suggests, may impact revenue growth, slow decision-making for clients in
34:14the United States.
34:15So they've slashed the outlook for Infosys, Wipro, Tech Mahindra by between 10 and 14 percent.
34:20Arun Sharma, that's a real concern.
34:22The fact that in any case, because of artificial intelligence, the whole IT sector, which is
34:27one of India's key exporters to the United States IT services sector, is going through
34:32a lot of churn, a lot which was being done by engineers, now being done through AI.
34:38And in the midst of that, you've got Trump putting these tariffs.
34:41And if that gets impacted, that then starts impacting real jobs, because these IT companies
34:46currently employ lakhs of engineers, both in India, the US and elsewhere.
34:50That's where it starts to hit home.
34:53So I think Nomura's report is focusing on something that we should be discussing more,
34:58which is the impact on the domestic economy in the United States of these tariffs.
35:02I think many of the panelists have said that the supply response or the manufacturing response
35:07is not automatic.
35:08There are many structural aspects to manufacturing moving.
35:12And so clearly, if you see, nobody's really celebrating, even those people who we would
35:18expect to benefit from these tariffs in the United States.
35:21You hardly see anything in the media saying anybody's really welcoming.
35:25In fact, the US Chamber of Commerce came out and said, this is going to be very negative
35:29for the US economy.
35:32And this prediction of potential downside effects on the Indian IT sector is really
35:40based on the fact that two or three things are likely to happen.
35:44One, that the CAPEX and the IT investment plans are going to be certainly watered down
35:54as people want to do a wait and watch on how the overall businesses are going to perform.
35:59So one of the first things gets cut is the IT budget.
36:02That's number one.
36:03Number two is that their ability to expand and to deliver various services is going to
36:09be impacted potentially by the decline in the consumer sentiment.
36:13That's number two.
36:14Number three is the inflationary pressure, again, because the inflation goes up because
36:18of the higher prices passed on to consumers.
36:22There's a chance that the Fed will have to deal with this by raising interest rates,
36:26which will again point all to what Goldman Sachs has been pointing to a 35% probability
36:32of a recession.
36:33It may be even more and sooner than we expect because of the sentiment.
36:37So I think that is certainly a risk for India and the world for that matter, because this
36:43is going to then ripple down.
36:45We are, like it or not, in a very globalized economy.
36:49We are producing globally, we are buying globally, we are trading globally, our logistics are
36:55global.
36:56So there is no real domestic economy left in the world per se.
36:59So when we disrupt one economy, we disrupt everybody.
37:03And in my view, that's the biggest risk, that we have a slower global trade growth.
37:09Let's take a look at how the Indian stock markets are reacting.
37:11I'm joined on this broadcast now by Business Today's Chief Market Analyst, Shailendra Bhatnagar.
37:16Shailendra, give our viewers a sectoral sense of which sectors the markets feel are most
37:22negatively impacted and which seem to have come out relieved that they've been exempted
37:27from Trump's tariff barrage.
37:30So one, good morning Rahul and thank you for having me over.
37:33It's a very, very exciting day on the Indian markets.
37:36The knee-jerk that happened in the morning seems to be bought into, apart from two or
37:42three negative counters such as Tata Motors, which see a lot of their JLR exports going
37:48to the US, which will be hit by that 25% uptick on tariffs.
37:53The mood is fairly buoyant.
37:55Pharma across the board is jumping with glee.
37:58The index itself is up 4% because no tariffs have been imposed by the US on pharma imports.
38:05So look at how Aurobindo Pharma is doing.
38:07Look at how Zydus Life, Dr Reddy's are just burning rubber as far as markets are concerned.
38:13But for the moment, there is a spot of cheer in textiles as well because countries like
38:20Vietnam, countries like Bangladesh, who were our major competitors in this space, have
38:26been hit by higher tariffs compared with India.
38:29So look at Gokhaldas exports, up circuit 5%.
38:33Look at other exporters in the textile space doing pretty well.
38:37But pharma is a clear, clear winner.
38:40Auto ancillaries are clear losers and to some extent even Tata Motors.
38:45Rahul?
38:46You know, let's spend a moment thinking of how this impacts you and I.
38:52For example, if you are planning to buy a new car and if, especially if this is, you
38:59know, something that you're thinking about in terms of buying an imported car.
39:02Siddharth Zarabi, does it just make sense for Indian consumers to hold off because if
39:06these customs duties and cars come down, whether it's a Tesla or anything else that you wish
39:10to buy, you know, could it impact car sales as consumers get into this wait and watch
39:16kind of mode?
39:17Ki dekhte hain ki tax kam hoga tab jaake khare denge, it doesn't make sense to go and buy
39:21right now?
39:22Rahul, very good point.
39:25And before I answer that, let me just point out one very important thing for our viewers
39:30that we have just noticed as we go through the fine print of the order.
39:34The actual order of tariffs says India's tariff is 27 percent and not 26 percent.
39:42And why I mention this is that just look at the nature in which this rather haphazard
39:49imposition has happened.
39:51So perhaps sanity will prevail in the United States going forward.
39:55But on the issue of sectoral impact, it's very clear that despite what the US has done,
40:03India has not surrendered its power to levy anti-dumping duties.
40:09Why do I say this?
40:10Because if there is any dumping, for example, the steel sector is very fearful of what might
40:16happen on account of a flood of cheaper Chinese imports or other country imports impacting
40:24it.
40:25That same logic will apply across sectors.
40:28So is there a sort of major discount offer that is likely across sectors?
40:35I do not see that happening in the near term or in the long term.
40:40The challenge, of course, is for domestic producers to match up to potential rivals
40:47like BYD.
40:48You made that point.
40:49In the electric vehicle space, technology will drive competition and pricing cannot
40:55drive competition in the Indian market.
40:58The Indian market is unique.
41:00It has a super premium category and it has a mass category.
41:05And therefore, technology, better features may drive, pricing will not drive it.
41:11And the government of India retains the power to levy anti-dumping duties on any sector,
41:17any country where it feels that domestic producers are likely to get hurt.
41:21Rahul.
41:22You know, I want to give you a sense of what the different research reports are saying.
41:29Morgan Stanley has put out a report saying they prefer India but remain cautious on Taiwan,
41:34Japan, South Korea.
41:35Those economies are far more dependent on exports than India is.
41:39Bernstein's put out a report where they say heavy tariffs in India will not sustain, rates
41:43may not sustain in the second half of 2025.
41:46IT services and pharmaceuticals are untouched, Bernstein says by this announcement.
41:51We don't see the trade war escalating.
41:55Now this becomes important, Professor Latham, how much of this is now cast in stone and
42:00how much is really a negotiating gambit that, you know, impose such stiff tariffs that countries
42:09across the world come under pressure and start pulling back their own tariffs and to what
42:15extent do you think Donald Trump is now determined to stay this course or is it frankly as you
42:19said last time when you came, impossible to get into his head and know what he wants?
42:24Well it is impossible to know what he's thinking but there are two tendencies at play here.
42:30One of which is you might interpret all of this as really doubling down on the neoliberal
42:36free trade project from the post-Cold War era.
42:41He's really using tariffs as a cudgel to beat everybody into reducing their tariffs and
42:51therefore doubling down on that neoliberal free trade project.
42:57But the other tendency is quite the opposite, which is, you know, free trade has not worked
43:04to America's advantage and therefore what we need to do is build Fortress America.
43:12And adjacent to that line of argumentation is this.
43:15There are two ways in which countries have responded to Trump's tariffs.
43:19One of which, I'm Canadian, I confess, even though I live in the US, one of which is to
43:25declare war on the United States.
43:29And to really, you know, Canadian liquor distributors, which are state-owned, provincially owned,
43:38have pulled all American booze off the shelves and that's just the tip of a very big iceberg.
43:46Canada has declared war on Trump, who's declared war on Canada.
43:51The other approach, though, is the Indian approach, which is, can we do a deal?
43:57Can we find some way of, to use a Canadianism, stick handling this, negotiating and navigating
44:05this, so we don't suffer the worst consequences?
44:09And I'm not sure which approach is better.
44:12The Canadians are really, really up for a big fight.
44:17India, it seems to me, is up for, let's do a deal.
44:22And those are two very different strategies in terms of dealing with the Trump tariffs.
44:31Well, that's where Prime Minister Modi's Gujarati DNA and the desire to cut a deal, Sushant
44:37Sarin, may come handy.
44:39That why get into a lafda with, you know, a much bigger economy.
44:43Let's figure out how we can just stay calm, keep our heads cool and get across the finishing
44:48line on a bilateral trade agreement as soon as possible.
44:52But that's the smart thing to do, isn't it, Rahul?
44:55The United States is a much bigger economy and we have a very profitable and a fruitful
45:01trading relationship with the United States.
45:04Why the hell would we want to get into a massive trade war with the US?
45:08Now the Canadians are most well, Canadians are getting into all kinds of scraps with
45:12all kinds of countries anyways, so they can get into a scrap with the US as well.
45:17But does it suit India's interest to have a kind of a negotiated trade deal with the
45:23US?
45:24Or does it make sense for us to, you know, go into a kind of a rage and then say, OK,
45:31fine, we are now going to retaliate against the US.
45:34How does that serve our interests?
45:35So I think what we are trying to do is the sensible approach of trying and navigating
45:40through this new mess in global trading relationships which are going to come.
45:46And I think, I don't know who it was, but yes, the old WTO based order is breaking down.
45:54So you will have bilateral trading arrangements with most of the countries, which is what
45:58we are getting into.
45:59But there are two impacts, Rahul, which I think we need to take into account.
46:03One is the geo-strategic, geo-political impact.
46:07And that is the so-called US leadership of the world as the paramount power.
46:13What does this kind of a trading war do to that position of the United States vis-a-vis
46:22its allies, vis-a-vis other countries which were also trying to get close to the US or
46:28which had a stake in the US market?
46:30Now, the US domination was not just military.
46:33It was also the US dollar and it was also the attractiveness of the US market.
46:37Now, if both these things are going to start coming under strain, how does that impact
46:43the primacy of the United States around the world?
46:46Not immediately, but say in the next five years.
46:49Second is the India impact.
46:50Now, you know, how many Teslas can they sell in India?
46:54Come on, at the very cheapest, it's going to be 70 lakhs or rupees.
46:57Maybe, Rahul, you can afford it.
46:59I can't.
47:00I don't think I'll ever be able to afford a car like that.
47:02So I'm going to go for my at best, maybe 10, 15, 20 lakh rupee car, OK, on a, you know,
47:08maybe on a five-year, seven-year loan.
47:10I can't afford a Tesla.
47:11I don't give a damn whether the Tesla comes with 70 lakhs or one crore.
47:15I don't care.
47:16They can make as many cars as they want to make in India.
47:19It doesn't matter to me.
47:20Same is the thing with Harley Davidson.
47:22You know, we were being stupid by levying the kind of taxes we were levying on the Harley
47:26Davidson or on American whiskey.
47:28Rahul, you and I are both Punjabis, we love our Scotch whiskey.
47:31I am damned if I'm going to ever drink American whiskey or Canadian or any other whiskey,
47:36right?
47:37So why were we imposing 150 percent duty on that?
47:40For what reason?
47:41So when our trading, when our commerce ministry starts levying tariffs, do they even apply
47:49their mind to what they're trying to do?
47:52Or is it just, you know, some babu sitting out there and suddenly gets a fancy that this
47:57is a sin good and I'm going to impose this kind of a tariff.
48:00So this kind of madness needs to drop.
48:02And I think the one thing that Mr Vijay said earlier is the single most critical thing
48:07where I will keep taking shots at the government in India.
48:12This is regulatory inspector Raj that we have in this country is the biggest millstone around
48:19the neck of the Indian productive class, the Indian entrepreneurial class, until and unless
48:25you are going to get rid of this inspector Raj that every two bit third rate inspector
48:31can go into a business which is even following the law and extort money out of them and nobody
48:37says anything about it until and unless your state governments can shape up and start encouraging
48:44entrepreneurs to come and set up industry and not harass the hell out of them.
48:49Please forget about making India one of the best investment destinations around the world.
48:56It's not going to happen.
48:57We have missed a lot of that investment coming into India to Vietnam and some of the other
49:02countries which are much smarter than us and quicker than us in attracting those investments.
49:06Can we do it now?
49:08I don't know.
49:09I hope we wake up and we smell the coffee.
49:13Of course, you know, Mr Goyal can keep going around the world and saying India is the fourth
49:17biggest economy, fifth biggest economy.
49:20It means nothing to nobody until and unless you are going to open your economy and you
49:24are going to free your businessmen.
49:27I'm sorry, you would not have gotten the plot correct.
49:31Okay, Sushant, A, I don't drink whiskey, B, I have the smallest car in the parking bay
49:40where our cars are parked, but I will deal with those barbs off air.
49:44For the time being, I have one last question for P.N Vijay on why this could really be
49:49a big opportunity for a country like India.
49:52Just the fact that we reduce our regulatory cholesterol and we open up our trade arteries,
49:58production, manufacturing arteries.
50:00This may happen under duress because of what Trump is threatening and wanting to do.
50:05But the fact is, if it happens, it's net net positive and remember, in India, no liberalization,
50:11no economic reform ever happened because it was the right thing to do.
50:14Whether it's the reform from the 1990s, which Narasimha Rao and Manmohan Singh did, it happened
50:19at that time under duress from the International Monetary Fund.
50:22It could happen this time under pressure from Donald Trump, but net net, it might be good
50:26for India.
50:27You are asking me, Rahul?
50:38Hello?
50:39Yes, Mr. Vijay, I am.
50:41Yes, I think I second your thoughts 100%.
50:45I think this is net net an opportunity.
50:49If you look at another interesting aspect is whenever the US dollar has been weak, investments
50:56into India has surged.
50:59If you look at the last 10 years of the Indian markets and Indian remittances, a strong US
51:04dollar, the US dollar index, which went up to 110, the Indian markets fell.
51:09As the US dollar has been falling due to Trump's whatever you are smart or quixotic
51:16or whatever policies, the US dollar has slowed down because of a fierce US recession, which
51:22is the smart money is now saying, where can we go?
51:25And India seems to be the most domestic among the large economies and ipso facto the least
51:31affected by these tariffs.
51:33And so India is in a relatively sweet spot.
51:37If we can get our act together, if we can use this opportunity to remove the 60,000
51:42compliances that somebody was talking about the other day, we can use this as a great
51:46opportunity to make our industry globally competitive.
51:50And let us not forget all this Harley-Davidson, all these bourbons are just announcement effect.
51:56But what really matters is to make Indian industry globally competitive by reducing
52:01the shackles and controls and Inspector Raj, which you have brought on ourselves.
52:09You know, we've had a insightful discussion.
52:12I want to thank our guests for joining us this morning and for staying up late at night
52:15tracking Donald Trump's press conference.
52:19Whenever this has been tried, there is enough historic economic literature which tells us
52:24this is boomerang.
52:25It boomeranged in the past, it will boomerang again.
52:28But Donald Trump is determined on committing harakiri and the rest of the world must deal
52:32with it.
52:33I think Prime Minister Modi and the Indian government has a smart, smart approach.
52:38You know, instead of getting riled up and trying to fight with the school bully, just
52:42try and avoid him or get on his side.
52:44There's no point in getting into a war you cannot win.
52:47We will track developments through the day.
52:49We'll have more voices.
52:50I'll be back at 8 p.m. in the evening as we look at the impact of Donald Trump's tariffs
52:56and how Indian companies are looking at dealing with this new reality.