Donald Trump’s aggressive tariff strategy might hurt the US economy, but it could present a major opportunity for India, according to investor and author Ruchir Sharma. In a recent discussion with India Today News Director Rahul Kanwal, Sharma highlighted how shifts in global capital flows, spurred by Trump's trade policies, could position India as a significant beneficiary.

Sharma believes that while Trump’s move to return tariffs to the core of US economic strategy could result in economic contraction for America, it may simultaneously direct capital toward emerging markets like India.

Trump’s Tariffs Could Slow the US Economy

Trump has proposed a 10% base tariff rate across all imports, a substantial leap from the 1%–2.5% range during his first term. Sharma notes that most economists estimate a 0.1% decline in GDP growth for every percentage point increase in tariffs. That means a 10% base rate could shave 1% off US GDP growth—a significant hit to the American economy.

According to Sharma:

“Foreign capital inflows into India had dried up. But that could change now.”

As capital seeks new destinations, India’s relative stability and reform-friendly environment make it a prime contender for foreign investment inflows, both portfolio-based and foreign direct investment (FDI).

India’s Market Breadth and Trade Positioning

India, Sharma points out, has one of the most diverse equity markets among emerging economies:

“We still have more than 500 companies in India with a market cap above a billion dollars. That kind of diversity, you don’t find anywhere else in emerging markets.”

This depth in India’s capital markets makes it a compelling case for investors looking to diversify away from developed markets, particularly in a period where the US dollar may weaken, creating a more supportive environment for emerging market assets.

In addition to capital markets, India’s trade policies are evolving. After a prolonged period of protectionism, New Delhi is once again pursuing free trade agreements and engaging more openly with global markets. Sharma believes this reversal in trade posture is critical for India’s long-term growth.

“We’re getting more open again, and we need that. As a developing economy, we can’t afford to follow America’s model of turning inward.”

Breaking From Wall Street Dependence

Another key shift Sharma noted is the potential for Indian markets to move independently of Wall Street. In the past, fluctuations in the US stock market often dictated trends globally, including in India. But now, with India’s maturing ecosystem, domestic market resilience, and structural reforms, the Nifty and Sensex may no longer mirror US market cycles as closely.

This independence allows India to craft its own momentum, driven by local consumption, infrastructure investments, and a rising middle class.

Repositioning Within Asia’s Trade Routes

However, Sharma cautioned against overemphasising the US-India or US-China rivalry. He pointed out a revealing statistic:

“Of the ten fastest-growing trade routes in the world, eight don’t involve America. Five involve China. And India is part of only one.”

This means India needs to expand its trade presence across Asia. While geopolitical tensions with China remain high, Sharma advocates for pragmatism over confrontation:

“Some of that distress with China has to ease a bit.”

Without implying appeasement, he suggests that India should tactically position itself to integrate more deeply into Asia’s dynamic trade ecosystem—especially as intra-Asian trade continues to surge.

Trump’s Trade Strategy: Disruptive but Predictable

While Trump’s tactics appear chaotic to many, Sharma believes there is a calculated method behind the approach:

“He loves to throw a bomb in the room, see what happens, and then adjust.”

This shock-and-adjust model is seen in how Trump anchors negotiations with extreme demands—for instance, a 30% tariff threat—and then settles for 10%, while still declaring victory. Sharma argues that this performance-based style is designed to energise Trump’s political base, even if it disrupts global trade temporarily.

He pointed out that during Trump’s first term, tariffs only rose modestly, but this time around, a 10% base case would be far more impactful.

The Real Danger: A Trade War With China

Sharma flagged a critical risk: China’s retaliation. While the announcement of US tariffs doesn’t always rattle markets, it’s China’s countermeasures that cause real concern.

“That’s the accident risk. If China says we won’t negotiate, we’ll retaliate—that’s when things can go off the rails.”

This potential escalation of trade wars could trigger market panic and disrupt global supply chains, making it vital for India to monitor developments closely and act swiftly to absorb capital and trade realignments.

Global Realignment and India’s Leadership Role

Despite the chaos, Sharma sees a silver lining:

“Whether he (Trump) makes America great again is debatable. But he will make the world great again because leaders around the world are being forced to act.”

He cited Germany’s fiscal reforms as one positive example, suggesting that global uncertainty is prompting much-needed policy adjustments worldwide.

For India, the challenge is clear. Reacting to global shifts is not enough—the country must proactively lead. With its demographic dividend, expanding digital infrastructure, and policy maturity, India is now in a position to shape the next chapter of global trade.

Conclusion

Trump’s renewed focus on tariffs may slow the US economy, but it is triggering a massive recalibration in global trade and capital flows. India, with its strong market base, rising economic clout, and strategic policy shift, stands to gain significantly.

Ruchir Sharma’s insights offer a roadmap: India must remain globally connected, strengthen its position within Asia’s trade corridors, and use this moment to attract investment that might once have flowed to more developed markets.

As the world order adjusts, India has the opportunity not just to benefit from the fallout, but to lead in shaping what comes next.

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