Market Mix - India Holds, Modi Folds

JANUS VIEW

India Stays Tactical On Tariffs, But Modi's Cosies Up To Trump

US president Donald Trump would be horrified if told that he is proving Lenin right, but that is what he has been doing in the eight weeks since he assumed office. Obviously, he is not vindicating everything that Lenin said, just the observation that there are decades in which nothing happens and there are weeks in which decades happen. Trump has been making decades happen.

Buy European Only

Europe is not only planning to spend more on defence but also to make those acquisitions as European as possible. Rheinmetall, a German defence contractor, has seen its share price go up 48% over the last month, and Morgan Stanley expects it to double to €3,000. It would be reasonable to expect major European defence equipment makers to swell their order books, as governments increase their arms budgets and cut back on external aid and domestic welfare. The UK has decided to lower its aid budget to 0.3% of Gross National Income, from the current level of 0.5% of GNI, in order to elevate defence expenditure to 2.5% of GDP. The UK has also decided to trim its welfare payments.

A trend towards consciously buying European products, while boycotting American ones, is growing across Europe, reports AP, the trend being strongest in Denmark, where resentment against Trump’s threat to take over Greenland is the most acute — Greenland is a Danish protectorate. European company sales would go up, even as American company sales dip. 

Tesla sales are down 71% in the first two months of 2025 in Germany, and, in a repeat of Americans taking out their anger against Musk, the owner of the electric car major, by attacking Tesla showrooms and cars, Tesla cars have been torched in Berlin as well. Tesla sales are down not just in Europe, China and Australia, but in the US as well.

Does India’s Response Make Sense? 

Canada, Europe and China have talked tough, in response to Trump’s tariff threats. Mexico has not announced specific tariffs on its American imports but has said it would retaliate with proportionate tariffs against what is universally seen as American bullying.

This makes India’s emollient response to US tariff threats seem gallingly weak. But it makes sense for India to negotiate the best deal it can, instead of taking an abrasive stand vis-à-vis the US. India needs US help vis-à-vis China, and would not like to succumb to American pressure to end arms purchases from Russia. In fact, India is building on its Indo-Russian defence joint venture Brahmos Aerospace’s successful missile sales to Southeast Asian countries to expand arms sales. This calls for careful calibration of its rhetoric. 

That said, Prime Minister Narendra Modi’s trashing of the United Nations, in his American podcast debut recently, echoing the isolationist streak in MAGA Republicanism, would appear to have been self-demeaning appeasement of Trump. His joining Trump-owned social media platform Truth Social, after Trump posted the Modi podcast on the platform, is relatively more dignified.

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