“So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy,” says Arvind Sanger, Geosphere Capital Management.
I want to get your sense on this reiteration of the trade tariff deadline of 1st August that the US has imposed once again. What is your take on that because countries can continue to negotiate after that, but this is when they will have to start paying the tariffs. We still have a lot of uncertainty in terms of major economies and where they stand with the US. So, how do you think the markets could react in the near to medium term?
Arvind Sanger: The market is starting to realise that maybe the tariffs are going to sustain at a level higher than what the market was comfortable with. 10% tariffs was fine, but if you are talking about 15%, 20% 25%, 30% and the interesting thing is that none of the major trading partners neither Japan nor the EU nor India all of or Korea every time there is a talk, oh, now we are about to sign a deal with India, today it is oh, we are about to sign a deal with Japan, a few weeks ago it was oh, we are about to sign a deal with EU. I think nobody wants to be first because nobody is confident about whether any deal done with the US under this president is ever final or will he find some reason to recut the deal sometime in the near future.
So, this tariff uncertainty has been receded by this acronym taco of Trump always chickening out, but the concern the market is now starting to face is that maybe Trump is trying to prove he is not taco and there could be some tariff related turmoil. So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy. So, there is enough uncertainty out there that I do not think the markets can keep rallying like they have for the last couple of months.Well, indeed that is what the question is about because for major economies the trade deal is not yet through and specifically with respect to India, what we are getting to understand is that the trade deal is on its way back to India from the US for now, it is the fifth round of talks between India and US that have already concluded but no major announcement or result from that is what we are getting to understand. How do you think markets are going to react to this particular news flow because we have already passed that deadline of 9th of July and even 1st of August is approaching now. But if till 1st of August as well, if no trade deal is being announced, what could be the market reaction?
Arvind Sanger: It is bad for all global economies. Let us be clear, this is not US wins or US loses, and the rest of the world is not affected. It is US loses and it is all the major economies that are beneficiaries of global trade and all major economies are, India is maybe less affected because India’s merchandise trade is not as big a percentage of GDP than other countries but nobody is going to be unimpacted by that. So, I think that it is it is a negative for India along with everybody else.
I want to get your sense on this reiteration of the trade tariff deadline of 1st August that the US has imposed once again. What is your take on that because countries can continue to negotiate after that, but this is when they will have to start paying the tariffs. We still have a lot of uncertainty in terms of major economies and where they stand with the US. So, how do you think the markets could react in the near to medium term?
Arvind Sanger: The market is starting to realise that maybe the tariffs are going to sustain at a level higher than what the market was comfortable with. 10% tariffs was fine, but if you are talking about 15%, 20% 25%, 30% and the interesting thing is that none of the major trading partners neither Japan nor the EU nor India all of or Korea every time there is a talk, oh, now we are about to sign a deal with India, today it is oh, we are about to sign a deal with Japan, a few weeks ago it was oh, we are about to sign a deal with EU. I think nobody wants to be first because nobody is confident about whether any deal done with the US under this president is ever final or will he find some reason to recut the deal sometime in the near future.
So, this tariff uncertainty has been receded by this acronym taco of Trump always chickening out, but the concern the market is now starting to face is that maybe Trump is trying to prove he is not taco and there could be some tariff related turmoil. So, the markets have so far largely ignored Liberation Day and everything that happened then and now maybe we are coming to at least start to worry about the reality that tariffs may be higher than we expected and in the background you have all this talk about him maybe will he fire Powell and on the interest rate policy. So, there is enough uncertainty out there that I do not think the markets can keep rallying like they have for the last couple of months.Well, indeed that is what the question is about because for major economies the trade deal is not yet through and specifically with respect to India, what we are getting to understand is that the trade deal is on its way back to India from the US for now, it is the fifth round of talks between India and US that have already concluded but no major announcement or result from that is what we are getting to understand. How do you think markets are going to react to this particular news flow because we have already passed that deadline of 9th of July and even 1st of August is approaching now. But if till 1st of August as well, if no trade deal is being announced, what could be the market reaction?
Arvind Sanger: It is bad for all global economies. Let us be clear, this is not US wins or US loses, and the rest of the world is not affected. It is US loses and it is all the major economies that are beneficiaries of global trade and all major economies are, India is maybe less affected because India’s merchandise trade is not as big a percentage of GDP than other countries but nobody is going to be unimpacted by that. So, I think that it is it is a negative for India along with everybody else.
So, it is something we have to start worrying about. We have so far put that on the back burner assuming something favourable would come around, but it is looking things are looking uncertain and that is never good for global economies and certainly not good for India although, again as I said, India is probably one of the less impacted but again it will have an impact.
