Greed and Fear: Chris Wood of Jefferies Flag India as a beneficiary of the re-alignment of the US China tariff. Here's why | Einsmark news

In his latest report “Greed & Fear” of May 15, 2025, Jefferies highlighted how the relief of the US -China tensions could open new opportunities for countries such as India. While markets have been alleviated by the recent retreat in tariff threats, the global supply chain adjustment is going on a big boost. The most important turning point in the US China talks According to Jefferies, the turning point came at a meeting between US Treasury Secretary Scott Besent and Finance Minister Lan Fo’an in early May. The meeting, held at the IMF-World Bank Spring Meeting, led to a sharp reduction in the proposed reciprocal rates. This came after Donald Trump’s partial policy shift on April 9, which helped to leave a 22 percent rally in the S&P 500 on April 7. Jefferies noted that although the formal US tariff for Chinese imports remains at 40 percent, 20 percent of this is related to the Fentanyl issue and 10 percent dating from the first Trump administration. The firm expects a future trade agreement to reduce a lot of this by a ‘purchase agreement’, similar to the stage one trade transaction of 2020. Trump’s strategy shift has pointed out that the Trump administration apparently reconsidered its difficult attitude about China due to the declining approval ratings -from 52.3 percent in early May. As a result, Jefferies expects any new rates to limit 10 percent, much lower than the initially proposed 50 percent during Trump’s remarks on the liberation of the liberation of Trump. Nevertheless, Jefferies warned that these levels would still take care of the highest US rates since 1943. The average effective US tariff rate has already reached 17.8 percent. In addition, 55 percent of the Texas businesses interviewed by the Dallas Fed said they would transfer higher tariff costs to customers within three months of implementation, which would allow inflation to push higher. The growing advantage of India emphasized Jefferies that one of the unintended side effects of rising US-China trading tension is the acceleration of the diversification of the supply chain. This shift benefits India as multinational businesses look beyond China. The report noted that even if Chinese firms such as BYD or Catl were allowed to open plants in the US, national security issues could limit such movements – which preferred India as an alternative center. The scope of India, improving infrastructure and business -friendly reforms puts it in a strong position to attract global investment and manufacturing. Jefferies regards India as a relatively stable emerging market and a great winner of the global rebalancing of the trade. Macro relief and market optimism The cooling of trading tensions has also changed expectations for US monetary policy. Jefferies reported that money markets now in 2025 only 49 basis points of the cut of Fed rate – of 102 basis points at the end of April. In April, US job cuts fell by 62 percent compared to March, helping to facilitate the fear of an immediate recession. However, Jefferies warned that any return to the hard tariff rhetoric – possibly influenced by policy advisors such as Peter Navarro – could upset the markets. For now, however, the tendency seems to move away from aggressive protectionism. Worldwide trading patterns are changing in the longer term, Jefferies noted that the global trading flow is changing. China is increasingly establishing its international trade in Renminbi. In the first quarter of 2025, 27.8 percent of China trade was settled in its local currency – from 13.5 percent in 2021. At the same time, US part of the global import dropped to 13.8 percent from 19.4 percent in 2001, indicating a fall in its dominance of world trade. Jefferies also warned that the US dollar could possibly enter a long-term trend. Despite its recent strength after the denial of the tariff, structural shifts in global capital flow markets such as Japan and India can benefit. The firm pointed out that MSCI USA is trading at 1.8 standard deviations above its long-term average p/e of the highest among world indices. Jefferies concluded that although the worst of the US China tariff conflict is behind us, the broader shift in trade and investment flow is just at the beginning. India, thanks to its strong fundamentals, policy and strategic position, is an important beneficiary. As global manufacturers want to diversify and develop political relations, India is well placed to attract capital, technology and supply chains previously dominated by China. Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, and not of currency. We advise investors to check with certified experts before making investment decisions.