Arvind Sanger warns US tariffs on India could exceed 20% without a strong deal

Time of India

2 days ago

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"There's a lot of negotiating through the press going on, and there's a clear recognition within the Trump administration that implementing tariffs like the 100%+ ones announced back in April only result in U.S. retailers running out of inventory and store shelves going empty," says Arvind Sanger Well, so far it seems like 15% is where the EU and Japan have landed. But they've agreed to cough up—or at least President Trump claims they've agreed to cough up—a fairly significant amount of investment into the U.S. I'm not sure what kind of deal India is aiming for. A month or month-and-a-half ago, I thought India would be at the front of the line. Now, unfortunately, it seems like India is at the back of the line. And frankly, the deals are going Trump's way. He didn't have to give anything to the EU in exchange for what he got. I don't think he gave up much to Japan either. So, the problem is that the later you come to the table, the less leverage you have.In that sense, I'm not sure how it will pan out. But it's certainly going to be north of 15%, and whether it's 20% or higher will depend on how good a deal India can negotiate. Clearly, President Trump is negotiating with these public claims. They're not likely to reflect the final settlement, but we also don't know where it will ultimately land. What does seem clear is that it's unlikely to settle at the low levels we were hoping for just a few weeks ago.There's a lot of negotiating through the press going on, and there's a clear recognition within the Trump administration that implementing tariffs like the 100%+ ones announced back in April only result in U.S. retailers running out of inventory and store shelves going empty. That's not something the U.S. government wants. China recognizes that some of these threats are hollow because both countries are heavily reliant on each other.So my assumption is that there will be a lot of brinkmanship, but negotiations will continue. Tariffs are already at, I believe, 60%, which is not low. I'm not sure where things will eventually land, but my concern is that none of these outcomes are guaranteed. There's a lot of uncertainty, and yet the market is priced for perfection. That's the problem—global markets, especially the U.S. market, are assuming that everything will resolve perfectly. Yes, there have been a few good deals, but a lot still needs to happen.Well, remember, the sanctions are not directly on Russia. They're secondary sanctions on those buying Russian oil—primarily aimed at China and India, two of the largest buyers. Congress had proposed a bill imposing 500% secondary sanctions on Russian oil buyers, while President Trump has mentioned 100% sanctions. So that's the threat.On one hand, they're trying to negotiate deals with China and India; on the other, they're threatening them over Russian oil purchases. I remain skeptical. President Trump has talked tough on Iran and Venezuela in the past, but his actions have ultimately been restrained—to avoid oil price spikes—because he wants the Fed to cut rates. So I don't believe these threats will be acted upon, but over the past couple of days, he has been speaking quite seriously about them. We're keeping a close watch, though we remain skeptical. Still, the market is clearly pricing in the risk. If Trump follows through on his threats, it could cause major disruption in oil markets—Russia is, after all, the second-largest exporter after Saudi Arabia.That's an interesting one. The employment data might surprise on the downside. As for inflation, I'm not expecting any big shocks, but the worst-case scenario would be high inflation coupled with weak jobs data. That would trap the Fed—what do they prioritize then? Especially as these tariffs begin to bite. Remember, we're in a 10% tariff regime until August 1st, after which new tariffs kick in. So, in terms of inflation and growth slowdown, the Fed can't declare victory too early. They'll need to watch the data from August and September to assess the full impact of the tariffs before making decisions.If Chairman Powell says it's still too early to make a call—even with some encouraging signs—he'll likely avoid taking a strong stance in either direction. But the market, which is increasingly counting on a September rate cut, might get nervous. There's a lot of good news already priced in, but plenty of uncertainty lies ahead.