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Spoils Of A Trade War?
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In today’s edition — what the US-China trade war means for India; Tata Motors hopes for better prospects after June; and Netflix bets big on India.
DECODE THE NEWS
US-China Tariff Wars May Benefit Some Key Sectors In India
On Tuesday, US President Donald Trump imposed a 10% tariff on goods from Beijing, China, reigniting a trade war between the world's largest economies.
China quickly retaliated against the new US tariffs and within minutes Beijing announced to impose levies of up to 15% on US coal, LNG, crude oil, farm equipment, and select automobiles.
But what does this mean for India?
“In the US, India directly competes with China in several key sectors, particularly labour-intensive industries like apparel, textiles, footwear, and gems and jewellery. The imposition of tariffs is likely to benefit India in these areas,” Ajay Sahai, director and CEO of the Federation of Indian Export Organisation (FIEO) told The Core.
This isn’t the first time the two countries have clashed. In 2018, China and the US were involved in a trade war when Trump increased tariffs on Chinese goods, and China retaliated.
Uncertainty Prevails
However, under the current situation experts are uncertain about the direct impact and specific benefits for India, as the full scope of the situation is still unfolding.
While India may see some advantages in sectors where it competes with China in the US market, the broader consequences, including potential disruptions to global supply chains or retaliatory measures, remain unclear.
“The US is not a strong producer. When it imposes tariffs on China, it makes sense because China is a major supplier. The US has limited supply capabilities, mainly in agriculture, high-tech industries and aircraft. In terms of industrial products, it has almost nothing. That is why China is hitting back hard. But it's difficult for me to understand at this moment how will this impact or benefit India,” Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) told The Core.
In a further blow to US industries, China tightened controls on rare earth exports and metals essential for high-tech manufacturing and clean energy. The new Chinese tariffs will take effect on February 10, leaving a brief window for possible negotiations. Does this mean the tariff war might settle?
“It can be settled at any time. We saw the same with Canada—they imposed tariffs in retaliation, but after discussions with the Canadian PM, the measures were eventually postponed. So, anything is possible. If the other side offers some reassurance to the US, negotiations can take place, and positive developments cannot be ruled out,” Sahai said.
Trump, who paused a planned 25% tariff hike on Mexico and Canada in exchange for border security concessions, has warned of further escalation unless Beijing curbs the flow of fentanyl, a deadly drug, into the US.
“I believe that with Canada and Mexico, the issue isn’t about imposing tariffs to protect the US market. Rather, it’s more about immigration and the influx of illegal drugs. The tariffs seem to be a pressure tactic. So, if these countries commit to tightening border controls and curbing narcotics flow, the tariffs will likely not be imposed,” Sahai said.
Since Donald Trump was elected, he has announced tariff hikes targeting China, Mexico, Canada and BRICS nations. In January 2025, Trump threatened to impose 100% tariffs on BRICS countries if they attempted to reduce the use of the US dollar in global trade.
India Must Prepare
In December 2024, Trump warned that BRICS nations would face 100% tariffs if they tried to replace the US dollar in international trade.
“Tariffs are more about making noise than delivering real impact. It’s more about creating a stir and instilling fear than achieving tangible results,” Srivastava said.
Markets reacted sharply to the tariff hikes. Oil prices dropped 2%, stocks in Hong Kong faltered, and global currencies reflected growing concerns over a prolonged trade war.
While Canada and Mexico secured temporary relief, a resolution between the US and China remains uncertain, with experts predicting continued volatility as tariffs become a recurring economic weapon.
“Uncertainty will persist and with Mr. Trump in office, we must be prepared for it. Given that the trade war has begun and countries are retaliating, this situation is likely to continue for another month or so. However, I anticipate that by April, conditions should largely stabilise,” Sahai added.
PODCAST
On Episode 499 of The Core Report, financial journalist Govindraj Ethiraj talks to J. Kyle Bass, Founder and Chief Investment Officer at Hayman Capital Management.
Markets on Tuesday
The Rupee is Up
The China Syndrome
India Has Outgrown Emerging Markets – J. Kyle Bass Explains Why
CORE NUMBER
17,600
This is the number of companies that have been closed down till January 26 in the current financial year, while 1,38,027 firms were registered during the same period, according to official data shared to the Rajya Sabha, Business Standard reported. A total of 17,654 companies have been shuttered, including those amalgamated, converted into LLPs, liquidated, or struck off. The count stood at 22,044 in 2023-24 and 84,801 in 2022-23. The government has introduced various measures to ease business operations, including decriminalising 63 offences under corporate laws.
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FROM THE PERIPHERY
—💰 Less expendable income has affected all sectors of the Indian economy, including cars. But with the recent tax cuts, Indian automaker Tata Motors believes that there could be a demand revival by June 2025. PB Balaji, group chief finance officer at Tata Motors Ltd, told Bloomberg Television in an interview that after the new tax rules are implemented in April, the company will benefit from it. “When consumption starts going up, my trucks start plying more and more,” Balaji was quoted by Bloomberg as saying.
—📺 Content streaming platform Netflix is betting big on India, and increasing its annual budget for the country to $18 billion. Their plans include original titles and also partnerships with Indian production houses. According to The Economic Times, it plans 28 original titles this year. Among the major titles is Jewel Thief: The Heist Begins starring Saif Ali Khan. The OTT platform’s plans are backed by profits it has seen in recent times. In FY24 Netflix India's net profit rose 49% to Rs 52 crore from Rs 39 crore in the previous fiscal year.
—🔎 Nathan Anderson, the founder of now shutdown American short-seller firm Hindenburg Research, has said in an interview that they followed “red flags” from media reports to go into the investigation against India’s Adani Group. Anderson, in an exclusive interview with PTI, said, “We initially saw media articles outlining red flags, took a closer look, and just kept following the evidence.” He also said that he stands by all the investigations against the conglomerate. The Hindenburg reports had alleged money laundering and inflating revenues, among other things, which the Adani Group has denied.
—🫸 And even as the US-China trade wars play out, the Trump administration has reportedly deported 205 illegal immigrants from India early on Tuesday. According to a Reuters report, a US military C-17 aircraft departed from Texas at 3 am IST. The Indian Express quoted a US embassy spokesperson in Delhi as saying, “The United States is vigorously enforcing its border, tightening immigration laws, and removing illegal migrants. These actions send a clear message: illegal migration is not worth the risk.”
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