‘Capital may shift away from US assets’: Sandip Sabharwal explains how tariff shock could create opportunity for India

As the world reels from the sweeping new tariffs imposed by the US, market expert Sandip Sabharwal has called the move a “high-risk gambit” designed to tackle America’s ballooning twin deficits. While the impact on global trade and inflation is already being felt, Sabharwal believes India may be uniquely positioned to benefit—if it plays its cards right.

“Once the dust settles, capital may begin shifting away from US assets. Emerging markets with low exposure to US trade—relative to their GDP—could benefit,” he said in a detailed blogpost. 

Sabharwal wrote that the tariff plan’s primary goal is to address the US’s mounting fiscal and trade deficits. “The federal government debt is now at $36 trillion—approaching 130% of GDP,” he noted, adding that interest payments alone could touch $1.6 trillion annually. “This is clearly unsustainable.”

On the trade front, the US runs a deficit of $1.4 trillion. “Theoretically, a 25% tariff could net $500 billion in duties. But with demand collapse and exemptions, realistic revenue gains may be only $200–300 billion,” Sabharwal wrote.

The economist pointed out that while the move may boost “Made in America” production in the long term, the immediate cost will be borne by consumers. “Even if manufacturing returns, the consumer will bear the burden through higher prices,” especially since post-Covid inflation has already squeezed household budgets.

Sabharwal warned that retaliation has already begun, with China slapping 34% tariffs on politically sensitive US goods like soybeans and corn. “To offset this, the US government may resort to subsidies, further dragging down export volumes and growth.”

For India, however, the shift could open doors. “With its largely domestic-driven economy, this could be an opportunity,” he wrote, suggesting that the RBI and government “launch aggressive expansionary policies” to stimulate growth as the global environment weakens. “The rupee’s weakness is less of a concern given the dollar’s relative decline,” he added.

On markets, Sabharwal expects tech to suffer while financials, capital goods, and autos could outperform, provided “supportive policies” are in place. In the long term, he said, “Capital may begin shifting away from US assets,” offering a potential boost to emerging markets like India.