Xenophobic autarky! Jefferies' Chris Wood on 50% tariff against India
ADVERTISEMENT 'Xenophobic autarky is the appropriate phrase GREED & fear heard one gentleman employ in the context of the latest extreme moves as regards tariffs this week, in term of the 50% tariffs now levied against India and Brazil, let alone the 100% tariff on imported chips, but with exemptions made for those companies which have pledged investments in America, such as TSMC, Samsung Electronics and Hynix," Christopher Wood, Global Head of Equity Strategy at Jefferies, said in his weekly newsletter.
He said the reality is that America has now gone rogue as regards the international trading system, which has its origins in the GATT, established in 1947.
"Meanwhile, there remains the legal question of whether Donald Trump has the authority to make these moves. GREED & fear would advise the rest of the world to act collectively rather than each country seeking to do its own deal with the US, which is a strategy that undermines the multilateral world on which so much prosperity has been built," Wood, known as an India bull in emerging markets circles, said.
Also Read | Tariff tandav on India's $87 billion export machine. Decoding impact on economy, markets
Trump's announcement of an additional 25% penalty on India for buying Russian oil comes into effect from August 27 and will take the total tariff to 50%, making exports unviable in the affected sectors.
ADVERTISEMENT While describing tariffs as 'beggar thy neighbour' policies which ultimately benefit no one, Wood said, the longer they are in place the more likely the negative consequences will show up and fester.Jefferies analyst Mahesh Nandurkar had earlier warned that the new tariff rate will imply that a large majority of India's US$87bn (2.2% of GDP) worth exports to the US are now potentially at risk.
ADVERTISEMENT Only pharmaceutical and electronics exports, roughly 30% of India's US shipments, remain exempt for now. Analysts say that the most impacted sectors are textiles, chemicals, auto ancillaries and fisheries.
Also Read | Tariff game a non-event or new reality for your stocks? Here's how to Trump-proof portfolio
Goldman Sachs had already pencilled in a 0.3 percentage point hit to GDP growth from the initial 25% tariff. Now, with the additional duties, they warn of "a potential incremental drag of around another 0.3pp (annualized)," effectively doubling the economic pain.
ADVERTISEMENT However, Goldman maintains some hope in the three-week negotiation window: "We see downside risks to our growth estimates for both CY25 and CY26, but are not making any changes to our growth forecasts at the moment, given that there is a three-week window for negotiations."
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