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What will be the full effect of the secondary tariffs on the Indian economy? Have we already taken steps to create redundancies? Viewers, there's been a lot of talk from the prime minister's side taking on Donald Trump suggesting that India is never going to compromise on its economic interests. that India actually has the threshold to endure pain, economic pain like it did back in 1998.
Is this actually true? Let's speak with emerging market investment guru Mark Mobius on the Trumpian tariffs and on the principal question has Modi outflanked Trump now Mr. Mark Mobius is known to be a legendary investor in the India story viewers and he will be speaking to us and giving us an overview of how he sees these so-called sanctions.
Mr. Mobius, thank you for speaking with us and it's always a pleasure to get your point of view. You've said India's domestic market shields it from tariffs, but with secondary sanctions kicking in on various sectors of the economy, can India really stay insulated? Well, of course, there's there's going to be an impact if you're putting a 50% tariff on goods going from India to the US.
And when you consider that exports uh for India's about 20% of GDP and about 8% 18% goes to the US. It's going to have an impact. There's no question about that. But it's not going to be disastrous. Uh for some industries like garments, pharmaceuticals, uh precious stones, you know, diamonds, that sort of thing.
There will be a big impact. And already as you know we've seen unemployment rising in those industries but otherwise the Indian economy is in good shape still growing at a high rate. Let's say that India has 6% growth you can take a half a percent or 3/4 of a percent off that as a result of this tariff war.
Uh it's still very high growth. So I don't think we should make too much uh of this problem. I don't think it's going to be disastrous and of course eventually uh the US and India will come to some agreement. It'll be good for both countries. The US of course will benefit from some agreement with India.
As you know pharmaceuticals are very important for the US. They've got to bring the pharmaceutical costs down and pharmaceuticals from India are very cost effective. So there's going to be some agreement at some point but maybe not right away. Well, we have leverage. Pharmaceuticals is just one sector.
So I want to ask you in your opinion, Mr. Mobius, have you looked into the future to perhaps second guess whether India will retaliate indeed against the United States? Oh yes, definitely there will be some comeback. uh by the Indian government. There's no question about that. But uh I don't think it'll be uh substantial because uh I don't think the Indian government wants to accelerate uh this whole dispute.
I think eventually behind the scenes they'll be reaching some agreement. Uh the Indians are very good negotiators as you know probably probably better than the US. So there'll be some some agreement. Well, Trump's sanctions, would you say they're more a political gimmick than a serious economic strategy to bring India to a table so that there could be resolution in Ukraine?
How do you see this? Oh, there no question it's political. Trump wants to have the Ukraine war ended. He wants to put tre pressure on Russia and one way to do that is to reduce Russia's income from sales of oil. Uh and as you know India is a big big uh importer of Russian oil. Uh and so and of course China and you know interestingly enough the US is not going after China in that respect.
I'm waiting for them to impose another 25% on China for their purchases of Russian oil. So, it'll be interesting to see how this turns out. In that respect, I believe that this is a short-term measure on the part of the Trump administration and probably will not last. Short-term measure that won't last.
But uh you yourself as an investor, you've been quoted as having said that you parked a lot of your uh funds in cash. Doesn't that itself prove that Trump's policy is destabilizing global markets and could actually be counterproductive perhaps some point in the future, but also requires investors such as you to hedge?
Actually we had last count two or three months ago it was about 50% in cash now it's down to 25%. So we have not been frightened off these markets. Uh we're still looking at India as a very important market for us. Uh we have money in the Indian ETFs. Um we haven't been able to get into individual stocks in India because we're still waiting for government approval uh to make those investments.
But otherwise we have exposure to India and other markets around the world particularly the US. So uh India is definitely on our list and it's not going to be reduced by any means. We believe from a longerterm point of view India will do very well and if you look at the Indian index it hasn't really been impacted very much.
Uh and I don't think it will. I think it will still hold up fairly well. So what you're saying is you remain bullish on India and is this view in your opinion shared by other colleagues other investor colleagues of yours that you know of? uh probably not because as you know um other investors tend to be a little more short-term uh in their views and I think what's happening now is that uh there's been some retreat from India on the part of some big investors because they see China coming up if you look at the China index you'll see that China is doing very well now and I mean it's nowhere near the highs that it was previously but it's coming up and probably a lot These investors are switching from India to China.
But this is a short-term phenomenon. I don't think this will be a long-term development. Well, Trump has sanctioned India even though Biden once leaned on New Delhi to buy Russian oil to keep inflation down. So, isn't this both bad politics and bad economics? Mr. Mobius? Oh, yeah. I mean from the point of view of India of course it's bad economics.
India should get its fuel from the cheapest place possible and Russia definitely is the place to be for India. Uh the good news if India wants to make a switch the good news is that as you see oil prices are down and are probably going down lower. So there'll be a lot of choices uh for India to purchase oil if they want to steer away from uh from Russia.
But uh yes from the point of view economics it's bad economics for certainly for India. Uh the US of course wants to sell more of its own oil but its own oil is probably going to be more expensive given the transport costs etc. But that remains to be seen. So uh I think the options are open for India.
Lots of choices for them to get alternatives uh for oil imports. But still Mr. Mobius denying India the right to make its own choices. Uh that's not good policy coming from a friend is it? I mean yes India has options but why should it be forced to explore options that perhaps at this moment it doesn't want to exercise?
That's for sure. not good at all and uh uh it's too bad that you've had this kind of development because India and the US should be very good friends and I think over the long term uh this will take place once agreement is reached and I think it will be reached I think they'll become they'll come to some kind of accommodation because India I think has a good argument to say look if you're going after us why aren't you going after China for their purchase of Russian oil so and also Who knows what happens in Ukraine.
Um India may see a development in Ukraine which is towards a more peaceful situation and that will take the pressure off as well. So there are a lot of moving parts in this whole development and I think it's too I don't think we should take a shortterm view and take a longer term view and that longerterm view means India and the US will do very well together and we'll be good friends.
Well Mr. Mobius you've said that China could even win by skirting patents or finding new roots. Doesn't that mean Trump is weakening allies like India while hardening uh the United States own rivals for instance? Yeah, of course, China is in big trouble as well. You must remember that China is much more dependent upon um the exports to the US than India.
And if you look at the situation in China, it's not very good. Not only economically, but also politically because uh the the she administration is now under incredible pressure. And in fact, as you know, there's talk of him even having to step down at the end of the day. So there's a lot of pressure on China.
So China is not getting away with anything at this stage of the game. And of course of these tariffs that the US has imposed on China is hurting across the board. So probably the impact of the Trump tariffs is greater on China than on India. So let me ask you why hasn't the Indian market been rattled?
It seems that it has discounted the impact or has the government taken steps to outflank or perhaps I won't use that word but at least outmote Trump's tariff obsessions. Uh yes, the market has you know the market always thinking ahead. So they've already discounted what's happened so far. The it's in the market right now.
So and you can see the market has not really been impacted that very much. But the good news is that as a result of this uh the Indian government and I think Modi as you know has long favored reform of the government bureaucracy and of the very complex tax system that is in place in India and I think changes in that area will be very good for the Indian economy.
So in some ways what the US has done is a blessing in disguise for India because it's forcing uh the Indian government to make some changes and reduce the bureaucracy, reduce the complexity of the tax system and generally make reforms that are good for the economy and good for business. So uh it's going to be very interesting to see what the Indian government as you know already has made some changes and I think going forward there'll be more changes being taken.
Uh, how can investors trust emerging markets when Washington keeps shifting the rules, Mr. Mobius? Well, and look at how how can they trust the US market because as you know, every time the rules are changed by Washington, the US market should be affected as well. So, it's it's it's affecting everyone.
But I think uh what is happening now is that a lot of it is being discounted because they realize that uh a lot of this is shortterm and is uh Trump antics uh Trump drama uh and not really very meaningful at the end of the day because must remember that Trump doesn't have complete freedom to do what he wants.
He's already being challenged on the tariffs that he's imposed. So uh there'll be you know it's not at the end of the day not going to be as bad as people imagine. Okay. My my final question Mr. Mobius Trump says tariffs protect US industry but as you note and you yourself have written this the future lies in automation and robotics.
Isn't he clinging to outdated economics while endangering future growth uh in America by resorting to these u this tyranny? Well, there's no question that if the US wants to become a big manufacturer and replace some of the imports, they have to automate. Robotics will be very very big in America, but that's going to take time.
So, it won't happen overnight. That's for sure. So I think it is true that uh Trump may be expecting more than he imagined but you must remember that there are a lot of people at the lower end of the labor market in the US that would be benefited by some import restrictions. So jobs will be created as a result of that.
But at the end of the day, if the US really wants to become a manufacturing powerhouse, it will have to be automated. Well, thank you for speaking to me, Mr. Mobius. Always a pleasure. Thank you very much.
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