Stay cautious, nimble, and do not put all the chips on the table: Arvind Sanger

Arvind Sanger, Managing Partner, Geosphere Capital Management, says he is sceptical whether there will be greater clarity once Trump rolls out his tariffs in the next 24, 36 hours. His assumption is there will be negotiations and there will be adjustments as we go along, but President Trump is trying to go after his long-held belief that somehow the rest of the world is taking advantage of the US and tariffs will fix that problem. Sanger, along with most investors and economists around the world, do not think tariffs are a magic wand. A lot will depend on how countries approach the tariff issue.

Seems like everything is set for April 2’s tariff announcement and now markets also have begun pricing that in?
Arvind Sanger: In the next 36 hours, I expect to have greater clarity on what is coming in terms of the tariff regime. So, let us separate it into two things. The tariffs that have been announced on steel, aluminium, auto, and now pharma are sectoral tariffs and then there are the country tariffs or the blanket tariffs across all.

I do not see a rollback imminent in the sectoral tariffs where there is much more room for negotiations and for hopefully much less bad outcomes would be in the country tariffs where he says okay you put tariffs on my stuff, I will put tariffs on your stuff and then everybody agrees that will kind of normalise those. So, A) there is uncertainty, but B) These sectoral tariffs may stay longer, these country tariffs may not, but in the meantime, markets are going to be yo-yoing around and sectors are going to be yo-yoing around. This is a time to stay cautious, nimble, and not put all the chips on the table.

The cat is going to be out of the bag soon. What happens after that? Will the cat jump?
Arvind Sanger: At the end of the day, you could argue that once the cat is out of the bag, the bad news is known, and then the market can start to evaluate winners and losers and go up again. But the questions then become, do others retaliate? Does it ratchet? So, this is game theory now as to what comes next. Is there retaliation? Will there be negotiation to bring the tariffs back to normal for both sides? How will this play out? And this will create a lot of uncertainty both in businesses and in consumers and global investors.

As you were saying earlier, I am not sure in April we are going to be able to declare victory unless President Trump surprises us with very benign tariff outcomes. My assumption is there will be negotiations and there will be adjustments as we go along, but President Trump is trying to go after his long-held belief that somehow the rest of the world is taking advantage of the US and tariffs will fix that problem.

And I, along with most investors and economists around the world, do not think tariffs are a magic wand. But let us see how it plays out and how people take an approach. India has taken an intelligent approach, rather than talking about retaliation, it is talking about figuring out where it can lower tariffs without too much damage to the Indian economy.

So, that is the question. It may end up being country by country or sector by sector trying to evaluate what happens. So I do not think we get an all clear signal. I am somewhat sceptical whether there will be greater clarity once Trump rolls out his tariffs in the next 24, 36 hours.

For India market investors, what should be the positioning? We have already had a steep correction. We are already rebounding. FII flows are back into the country. Should Indian investors wait and watch? Wait for the froth to settle down, and see how the Indian government retaliates and then take the sectoral calls or have we bottomed out for good?
Arvind Sanger: If you are looking at domestic facing sectors, as an investor, you should be focused on valuations and where things are attractive. Most of the domestic facing and India has got a large service and domestic facing economy is not as impacted by exports. The other good news from an India standpoint is that we do not think President Trump is focused too much on the services sector. So, to the extent that Indian IT is not affected by pharma, but IT may not be, those become sectoral places to hide out, although IT has its own challenges with AI, but at least from a tariff standpoint it is not at risk.

In any case, 24, 36, 48 hours, it really does not matter. The reality is that the tariff situation might create buying opportunities in sectors that are sold off even though they have nothing to do with the tariffs. Those are the most important ones to take advantage of. The others, where tariffs are in play, we want to be a little more patient to understand how things will play out.