Tariffs are expected to drive significant long-term shifts in global supply chains, particularly in strategic sectors such as electric vehicles, semiconductors, and critical minerals, said Rohit Sarin, Co-Founder of Client Associates, in an interview with Moneycontrol.
Commenting on the proposed 50% tariff on copper by the US, Sarin noted that it would significantly raise input costs across a wide range of industries, especially electronics, construction, electric vehicles (EVs), and solar panel manufacturing, at least in the short term.
Separately, he warned that a potential 200% tariff on pharmaceutical imports, if implemented, would have a far more disruptive and immediate impact on the already strained US healthcare system.
Do you expect significant changes in global supply chains as a result of the ongoing imposition of US tariffs?
Tariffs are expected to drive significant long-term shifts in global supply chains, particularly in strategic sectors such as electric vehicles, semiconductors, and critical minerals. In response to escalating trade tensions and protectionist policies, many companies are reconfiguring their supply chain strategies to mitigate risks.
One of the most prominent strategies is the “China+1” approach, aimed at reducing overdependence on China, a country expected to be disproportionately impacted by recent trade actions. This approach reflects a broader transition from globalized to more regionalized supply chains. As a result, countries such as Vietnam, India, Mexico, Malaysia, and Thailand are emerging as attractive alternatives for manufacturing and assembly.
Simultaneously, policy shifts in the United States — including the CHIPS Act, the Inflation Reduction Act (IRA), and related incentives — are driving a surge in domestic manufacturing investments, particularly in semiconductors, clean technology, and EVs. These structural changes are reshaping global trade and investment patterns, creating new opportunities for emerging economies.
What could be the potential impact if the Trump administration imposes a 50% tariff on copper imports and up to a 200% tariff on the pharmaceutical segment?
The imposition of a 50% tariff on copper would significantly raise input costs for a wide range of industries in the US — particularly electronics, construction, electric vehicles (EVs), and solar panel manufacturing — at least in the short term. This could disrupt production economics and affect end-user pricing. Major copper-exporting countries such as Chile, Peru, and Indonesia would likely experience a decline in export volumes to the US.
In response, US importers may either ramp up domestic production or shift sourcing to more geopolitically aligned nations or those with Free Trade Agreements (FTAs), thereby accelerating the realignment of global copper supply chains.
Separately, a 200% tariff on pharmaceutical imports, if implemented, would have a far more disruptive and immediate impact. It would likely lead to a sharp increase in drug prices in the US and place additional stress on the already strained healthcare system.
Pharmaceutical companies may be compelled to relocate parts of their production to the US, but such a shift is both capital-intensive and time-consuming, particularly for complex drug manufacturing. Regardless, drug costs are expected to rise, which could adversely affect public access to essential medications.
Do you anticipate inflation in the US to trend upward largely due to these tariff changes?
There is a strong possibility that inflation will increase in the US due to higher tariffs, as the cost of products is expected to increase significantly. As firms relocate or restructure supply chains through reshoring strategies, production costs are expected to increase. However, only the tariff would not impact inflation. Overall inflation would depend on the monetary policy and fiscal policy response by the US government.
Do you expect the US Federal Reserve to hold interest rates steady for the remainder of 2025, with cuts only beginning in 2026?
We expect the Fed to hold rates for now. The timing of the rate cuts would be difficult to predict, as it would depend on the inflation trajectory, which in turn would depend on trade deals and the impact of the new tax bill.
Do you believe that consumption will continue to represent a relatively small percentage of overall economic growth?
Over the past couple of years, India has witnessed subdued private consumption. However, the recent income tax rebates and lower interest rate environment are expected to boost consumption as we advance.
Are you bullish on the capital goods sector?
We are currently neutral on the overall sector. We are selective in taking positions there as the valuations are quite stretched.
Do you think that PSU stocks, excluding oil PSUs, are fairly valued at the moment?
Not all PSU stocks are fairly valued. While financial services/banks are reasonably valued, defense stocks are trading at a premium. So investors have to be selective in this segment as well.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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