Remember 'Picture Abhi Baki hai' : Nilesh Shah of Kotak Mutual Fund reacts on Trump tariffs

With President Donald Trump’s recent decision to impose a sweeping 26% tariff on imports from India, Nilesh Shah of Kotak Mutual Fund remarks that "President Trump is proving what Sant Tulsidas wrote centuries ago, 'Samrath ko nahi dosh gosain'. (The powerful can’t be faulted or blamed)


According to Shah, the World Trade Organization (WTO) exists to regulate weaker economies, while stronger nations can do what they want and can even calculate tariffs as a deficit with the USA divided by exports to the USA and get away with it. We will soon see a case study to justify this novel definition, he added.


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“The US has imposed mass tariffs like this twice in history: in 1828 and 1930, with a gap of around 100 years and both those resulted in the recession/great depression,” Shah said.


Kotak Mutual Fund’s managing director believes that there is a high chance that the 2025 mass tariff hike will result in lower growth and higher inflation and if US markets are correcting, US consumption, which accounts for two-thirds of the economy, could come under pressure due to higher inflation and the evaporating wealth effect.


“The world’s response to these tariffs could take multiple forms—currency weakening, negotiations with the US under clause 4 of the order to satisfy their concerns, counter-tariffs, and even legal challenges within the US judiciary,” he added.


Shah highlights that though India is affected less than some of its peers, it must act strategically to turn the situation to its advantage. He suggests that India could bring footwear and garments business from other Asian countries if we play it right.


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“The world will respond to US tariff through currency weakening, negotiation with the US under clause 4 of the order to satisfy their concerns, counter-tariffs, and may be lobbying within the US to challenge this order in the judiciary,” Shah reacted.


“India has been hit lower than most of its peers. It is up to us how we manage the situation. We can bring footwear and garments business from Asian peers if we get our act together,” he further added.


Additionally, he stresses that India should be proactive about Chinese dumping and should negotiate hard with China to create a win-win situation rather than the usual lose-lose situation and most importantly we need to remember that 'Picture Abhi Baki hai.' "