Strong nations can do what they want, says Kotak AMC's Nilesh Shah as Donald Trump levies 26% reciprocal tariff on India

The latest round of retaliatory tariffs by US President Donald Trump has sent the global stock market into a tailspin, including the Indian benchmark indices. The tariff announcements by Trump remind Nilesh Shah, Managing Director at Kotak AMC of Sant Tulsidas, who centuries ago wrote, “Samrath ko nahi dosh gosain” – meaning that the strong can do as they please, and no one can blame them, highlighting the leeway powerful nations like the United States can take.

Elaborating his argument, Nilesh Shah in a post on social media platform X said, “WTO is meant for weak nations. Strong nations can do what they want. They 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.”

Organisations like the World Trade Organization (WTO) are designed to serve the interests of weaker nations, but some countries like the US don't seem to be bound by their norms.

Donald Trump late last night announced a minimum 10% tariff on all exporters to the US. It also levied additional duties for some of its biggest trading partners, including China, Japan and the European Union. On India, Trump imposed a 26% tariff, which, though higher than expected, was lower than some of its neighbouring Asian countries.

Many analysts believe these tariffs could hurt India's economy, as US exports make up 2% of India's GDP.

Past Instances

Shah said the US has imposed mass tariffs like this twice in history: in 1828 and 1930, with a gap of ~ 100 years. “Both those resulted in the recession/Great Depression,” Shah said.

He sees a high chance that the 2025 mass tariff hike will result in lower growth and higher inflation.

“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. For emerging markets, it will be called stagflation, but for the US, it will be called a hard landing,” the stock market expert warned.

However, he remains optimistic on India due to lower tariffs than peers. USA has slapped additional 34% tariffs on China, taking their effective tariffs to 54%, while on Vietnam, it has announced a 46% tariff. Similarly, Cambodian goods will be subject to a 49% tariff.

“It is up to us how we manage the situation. We can bring the footwear and garments business from Asian peers if we get our act together. We have to be proactive about Chinese dumping. We should negotiate hard with China to create a win-win situation rather than the usual lose-lose situation,” Shah said. Lastly, he belives that “Picture Abhi Baki hai", sparking hopes of India better managing this situation going forward through negotiations and other measures.

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