The changes in the global trade order have not been fully appreciated yet, said GQG Partners' chairman Rajiv Jain, who called the measures by US President Trump as 'seismic', and not fully comprehended by the world markets as yet.
"Even a slight shift in the long-term trajectory of manufacturing and outsourcing under the Trump administration could be seismic. Geopolitical tensions have added another layer. I personally believe markets have yet to fully comprehend these shifts — the changes are very real," chairman Rajiv Jain told CNBC-TV18 during an interaction on May 26.
Jain said the extent of impact of the US tariffs are still unclear and uncertain, as the negotiations are still unfolding and a deal between Beijing and Washington is still not in place. "Both sides (US and China), particularly the US, view this as a way to cool tensions. Even the US-UK discussions amounted to a framework, not a binding agreement. Trade deals take time. From a business standpoint, clarity is still lacking. If you’re a manufacturer in China considering relocating to India, Vietnam, or back to the US, you’re still wondering: will tariffs revert to zero, or spike to 100%? The uncertainty is significant. We don’t believe there’s a deal in place," said Rajiv Jain.
The global money manager added that President Trump is aiming to bring down non-tariff barriers through the trade talks. "It (Liberation Day tariffs) detailed the barriers to US exports — mainly non-tariff barriers. Chinese tariffs are not especially high; they’re in the mid-to-high single digits and could go to zero. The real concern is non-tariff barriers," said Rajiv Jain.
In his view, nations with large trade surplus with the US are more vulnerable to trade-related disruptions during negotiations. "That includes Vietnam, Korea, and Taiwan. India, on the other hand, does not have a large trade surplus. It has a sizeable domestic economy. From our perspective, India should be a net beneficiary. There will be hurdles — two steps forward, one step back — but the overall direction is favourable. Brazil and Indonesia may also benefit, unlike some of the surplus-heavy East Asian economies," said Jain, adding that India, in particular, will benefit from the evolving 'China+1' trend as global manufacturers attempt to diversify away from China.
On US equities, Rajiv Jain said it is time to be cautious, as Wall Street looks expensive from a valuations' standpoint, pressured by the spike in bond yields. "We think it’s time to be more cautious. Non-US markets look more attractive. If US markets underperform, capital will seek markets with reasonable valuations and decent growth. India fits that bill, as do select European and emerging markets," said Rajiv Jain.
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