From Barron's February 18 (pre-Supreme Court ruling):
India Is the Big Winner in Trump’s Trade War
About the author: Brian P. Klein is the founder of RidgePoint Global, a strategic advisory firm, and a former U.S. diplomat.
India may be one of the greatest benefactors of the new global trading order. With President Donald Trump focused on his on-again, off-again tariffs and China fixated on exporting its manufacturing excesses, New Delhi is increasingly at the center of shifting trade routes and reconfigured value chains. Its economy could soon be growing at a pace unseen since China’s rapid rise in the 1980s.
India is already the world’s fifth largest economy and is likely to overtake Germany and Japan to become a top-three economy by 2030. The recently signed free-trade agreement between the European Union and India, which eliminated most tariffs across nearly all trade categories, will turbocharge that growth.
When it takes effect in 2027, the free-trade agreement will be the world’s largest, covering a quarter of the population (more than the U.S. and China combined) and roughly 25% of global gross domestic product. Washington’s tariff threats added the pressure that both India and Europe needed to finally reach consensus in January after two decades of trade negotiations. The two regions’ futures are increasingly tied to each other rather than to the U.S.
Indian Prime Minister Narendra Modi knows it pays to keep the U.S. nominally open to Indian goods while building a massive free trade zone elsewhere. Under pressure to stop buying oil from Russia, India negotiated with the U.S. over tariffs earlier this month. The resulting U.S.-India Joint Statement is full of intentions and promises—the U.S. will reduce tariffs on India from a threatened 50% to 18%—but the agreement pales in comparison to the zero tariff rate on Indian goods entering the EU.
Manufacturing activity is already beginning to shift to India. BMW is accelerating its electric vehicle production in India for the domestic market. Ericsson, a Swedish telecom company, announced a new research and development hub in Bengaluru last year. South Korean conglomerate HD Hyundai plans to dramatically increase India’s domestic ship building capacity with a port expansion and greenfield port development in the southern state of Tamil Nadu, India’s hub for export-oriented automotive industries. The Indian government has also launched a major manufacturing effort, called Semicon 1, to attract investment in semiconductor production. So far, $18 billion has been invested in 10 projects.
Plenty of bumps remain along the trading roads that inexorably lead to India....
....MUCH MORE
Also at Barron's, February 19:
India Scored a Successful Trade Deal With the U.S. Investors Aren’t Impressed.
That's fine, impressing portfolio investors is not the goal. Impressing foreign direct investors and clearing the runway for a ten-year run to technological superiority is the goal for the Indian negotiators.
