Trump’s actions may not align with his tariff rhetoric, says former Freshworks executive

Trump’s rhetoric creates uncertainty but actions may not align with his statements

US President Donald Trump’s stance on reciprocal tariffs has created uncertainty across global markets, though his actions may not necessarily align with his statements, once geopolitical tensions abate, Swaminathan Padmanabhan, former VP at Freshworks Inc has said in a social media post.

Swaminathan said global disruptions are cyclical in nature, and stock market investors need to be patient.

“For equity investors, patience is key during periods of fluctuation. While Trump’s rhetoric creates uncertainty, actions may not align with his statements, especially as geopolitical tensions ease," he said.

While short-term stock market fluctuations are likely due to tariff uncertainty, former VP of Freshworks believes the long-term fundamentals for India remain intact. “India is still a growing economy with vast potential. Investors should focus on the longer horizon and stay patient during this period of market volatility,” Swaminathan said.

The reciprocal tariffs announced by Trump has pushed Indian government to reconsider trade policies as part of a bilateral agreement. The ‘overlapping sectors’ would see the maximum impact even as adjustments in the rupee-dollar exchange rate will continue to act as ‘natural stabilisers’, Swaminathan added.

“Any tariff impacts, if at all they come through, would likely be partially absorbed by currency adjustments, with the rupee-dollar exchange rate acting as a natural stabilizer,” he added.

Swaminathan expects the rupee to depreciate in the near-to-medium term, and ‘stabilise by the upcoming year, approximately in the range of 86-88’.

“Otherwise, if the depreciation continues unchecked, foreign institutional investors (FII) may be reluctant to invest," former VP of Freshworks said.

In a one-on-one conversation with Moneycontrol, Swaminathan said the tariff talks are another negotiating tactic by the US President to address the trade deficit with various nations, including India.

The overlapping sectors contribute 37 percent to the US-India bilateral trade, and the ‘Make in India’ initiative stands in contrast to Trump’s ‘Make America great, again’ intent, former Vice President of Datascience at Freshworks Inc said.

Swaminathan’s analysis of the total bilateral merchandise trade (around $120 billion) between India and the US revealed three distinct segments:

What dominates our exports: Predominantly India → US (approximately 35 percent of trade)

This segment mostly includes finished goods exports to the US - mainly by American companies operating in India. “Certain sectors like autos and electronics, including companies like Apple and Google, heavily rely on overseas production,” Swaminathan said. Any tariff increase would likely be passed on to the US consumers if the demand remains strong.

“If these imports get impacted from a particular country, it could lead to supply shortages, which would result in inflation. Additionally, if tariffs are high, these increased costs could be passed on to U.S. customers, which would further hurt the demand… but this is something the US cannot afford,” Swaminathan added. The alternative for the US would be to manufacture these goods domestically, Swaminathan said, which may be cost-prohibitive even for American companies.

What dominates our imports: Predominantly US → India (approximately 28 percent of trade)

This area is dominated by strategic sectors like oil/gas and defence equipment, where the US is keen to increase its share rather than restrict trade. Therefore, we could expect the US exports to rise, reducing the trade imbalance, combined with India's commitment to increase energy imports.

What are the balanced/overlapping sectors (approximately 37 percent of trade)

These are the sectors primarily at risk of facing consequences from reciprocal tariffs and includes segments where trade flows are significant in both directions, such as pearls/precious stones, iron & steel, aluminium, chemicals.

“While it’s difficult to generalise and call out an entire sector that might be impacted, there are rather specific sophisticated products -- such as certain chemicals,” Swaminathan said. He also expects to see a subtle impact on the jewellery segment going forward.

“There’s also aluminium, wherein the US doesn’t have much domestic production. So, any sector that heavily relies on aluminium as an input, whether in manufacturing or as part of a downstream product, would be affected,” Swaminathan said.

The US has already imposed a 25% tariff on aluminium, but Swaminathan thinks that this may not last considering the degree of aluminium recycling from the US that takes place in India.

In fact, if reciprocal tariffs come into play, India’s aluminium exports may not be subject to a 25% tariff, as India is not imposing such tariffs on the US, Swaminathan observed.

India’s steel sector may be protected by any damaging impact of an import tariff by US. “The domestic industry can still sell steel within India due to government protections. Even if international steel prices fluctuate, the government will safeguard the domestic industry,” Swaminathan said.

The only area we need to reassess is how to mitigate the China dumping in the form of steel imports in India. “There is little significant steel coming from the US into India. The main source is China, which has been dumping steel in India. The Indian government might already be reconsidering measures to address this amid its assessment of India’s trade relations,” Swaminathan said.