LIVE MARKETS-Trump's tariff threat a silver lining for India?

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TRUMP'S TARIFF THREAT A SILVER LINING FOR INDIA?

U.S. President Donald Trump's whirlwind tariff offensive has roiled markets and sent policymakers scrambling, but, April 2, the day Trump's reciprocal tariffs are set to take hold, "could be a date with destiny for India," according to Societe Generale.

"India could be an unlikely winner from Trump's tariff war," said Societe Generale's India economist Kunal Kundu in a note, because it can force Indian policymakers to do away with protectionist trade policies, which have cramped the competitive spirit of domestic companies.

U.S. Commerce Secretary Howard Lutnick had earlier said that India's import tariffs, among the highest in the world, warrant a reassessment of its "special relationship" with the United States.

In an attempt to circumvent the trade war, India is open to cutting tariffs on more than half of U.S. imports worth $23 billion in the first phase of a trade deal the two nations are negotiating, two government sources told Reuters.

Kundu writes that Trump's agenda could act as a catalyst to help India announce new reforms focused on improving the business environment.

This aligns with the Finance Minister Nirmala Sitharaman's Tuesday announcement that India will scrap a tax of 6% on digital advertisements online, easing costs for U.S. tech giants such as Alphabet's Google GOOGL.O, Meta META.O and Amazon AMZN.O as a way of soothing U.S. trade concerns.

Trump's tariff threat could also help India build new trade partnerships. Kundu highlighted the growing closeness between European Union and India that could further improve the economic ties between the two.

Kundu further writes that Germany's recent plans to increase defense spending could be another win for India given its much-improved capabilities as a defense equipment manufacturer and can help India find new destinations for those exports that may have to be rerouted away from American shores.

We already see new deals taking shape with India's Garden Reach Shipbuilders GRSE.NS, an aerospace and defense products maker, recently signing a contract with German maritime solutions firm Carsten Rehder Schiffsmakler and Reederei.

"While India's efforts to rationalize the tariff structure could create a few losers along the way, on balance it could prove positive for the economy in the long term," said Kundu.

(Sukriti Gupta)

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