Trump 2.0 can pose greater challenges for India: JPMorgan's Jahangir Aziz

India's imports from China crossed over $100 bn in FY24, making it India’s largest trading partner.

Donald Trump’s proposal of increasing tariffs on China can emerge as a greater challenges for India, going ahead, said Jahangir Aziz, JPMorgan's Head of EM Economics, in a conversation with Moneycontrol.

Aziz also warned against India’s strategy of increasing tariff on imports from China.

The possibility of a Trump 2.0 presidency is looming large, Jahangir Aziz said, as US approaches presidential election in November, adding that Trump's plan of imposing 60 percent tariff on Chinese imports into USA may also emerge as a challenge for India.

“We now have a separate risk, which is in the Trump 2.o administration. Suppose they follow up on their threats of a 60% tariff on China and 10% tariff on everybody else. Let's start with the 60% tariff on China, which is probably more likely than the 10% tariff on everyone else, right? You are going to get a 10-15% depreciation of Yuan. So that's the first shock that hits India, and that's the first shock that hits manufacturing exporters,” Aziz said.

Read More: India may become dumping ground for Chinese goods as US raises duties

On India’s tariff barrier, wherein the Indian government has progressively hiked custom duties, targetting import of Chinese components and inputs, Aziz said, “I do not see what exactly is the benefit of imposing tariffs on China, unless we also produce that product. Why are we buying things from China. It is either because it is cheaper, or better quality, or both. India does not produce so many things that modern manufacturing in India needs.”

India's imports from China have crossed over $100 billion in FY24, overtaking that of USA. China has now become India’s largest trading partner after two years, according to data released by Global Trade Research Initiative.

Read More: Expecting an uptick in US growth rate in 2025, says Jahangir Aziz of JPMorgan

“The proof of the pudding is that the cost advantage is so large that until and unless we are able to produce at a scale and bring down prices to a point that we can compete with China, high tariff - or protectionism - only increases either the cost of production within India or the cost of inputs within India, or the cost to consumers,” Aziz observed.

Aziz explains that India’s falling core inflation, much like that of the USA is due to Chinese imports. “If you stop that (import) by imposing tariffs, then the first thing that happens is prices of goods go up and your nice core disinflation disappears,” Aziz said.

You can watch the full interview with Jahangir Aziz right here on Moneycontrol.