He pointed out that the US under Donald Trump is “reintroducing discrimination into trade policy” and India is currently on the favourable side of that divide. “If you have the benefit of discrimination in your favour, that’s obviously good for you,” Wolf said. This could give India an opportunity to expand its exports and attract more foreign direct investment, particularly from US companies seeking to move away from China.
However, Wolf warned that political goodwill alone won’t guarantee long-term investment. Investors will still look at infrastructure, labour quality, regulatory ease, and long-term policy stability. “Do they feel that India is now a place where they can operate as easily as they can in China? That’s beginning—but we’re not there yet,” he noted.
A key challenge, Wolf emphasised, is the unpredictability of US trade policy under Trump. “What you’re seeing—and what you’re getting—is based on the whims of one man. You can’t be completely sure of it.” He said investors are right to worry about how long any favourable treatment will last, especially when building factories and committing capital for the long term.
Wolf underlined that India’s most reliable advantage is its growing competitiveness. “India is incomparably more competitive than it was 20 years ago,” he said, but cautioned against relying solely on America’s hostility towards China. “Relying on tariff privileges… is a bit risky. And I wouldn’t push it too far.”
Commenting on the upcoming July 9 deadline for the possible re-imposition of tariffs, Wolf said it was highly unlikely the US would reintroduce them at full scale. He believes Trump may announce partial successes and continue negotiations, especially with key partners like India, the EU, and Japan.
Even so, Wolf noted that current US protection levels are already the highest they’ve been since the 1940s, and that will continue to affect world trade. “But I find it inconceivable that they’re going to reimpose all those tariffs. So, I’m relatively optimistic that the peak craziness has passed.”
On whether the US could actually conclude meaningful trade deals in the short term, Wolf was blunt: “It was absolutely inconceivable that America would be able to reach concrete deals within that period… The idea that you could do it with 200 countries, or even 100 countries, in three months was complete fantasy.”
Despite the current uncertainty, Wolf believes global trade will continue to function—though possibly with new rules and persistent frictions.
Below is the excerpt of the interview.
Q: The April 2 reciprocal tariffs by Donald Trump took all stock markets down. Now we are just a few weeks away from July 9th when supposedly those reciprocal tariffs will reappear. Hardly any country has been able to sign anything with the United States. So, should we expect another major downturn and crisis, or will it be a bluff?
Wolf: The crucial thing is, I don’t know, and I have a very strong suspicion that nobody knows—except possibly Donald Trump, and I suspect he doesn’t know either. So, we’re making guesses. There are things we do know. It was never going to be possible—it was absolutely inconceivable—that America would be able to reach concrete deals within that period. It’s never happened in the history of trade policy. It normally takes years to complete a trade deal. Think of how long India and the UK have been trying—many, many years. The idea that you could do it with 200 countries, or even 100 countries, in three months was complete fantasy.
On the other hand, I think it’s also inconceivable—after the tremendous shock and the relief when he withdrew these tariffs, and the subsequent huge shock, the one big shock of the China trade war, which he also stopped—it seems inconceivable, with all that’s going on in the world, that Trump would want to start this panic over a level of tariffs that would basically stop world trade.
So, my assumption is they will announce one or two successes—not completed deals—but indicate that things are going in the right direction and that they are negotiating seriously. And they will say this particularly with regard to important countries like India.
They’ve already basically agreed with the UK. I suspect that will happen with the EU and a number of other important allies, like Japan. And they will say, “We are negotiating with these countries, and that will continue.”
I suspect they will also sort of forget about a lot of the smaller countries. They’ll just impose a 10% tariff—because that’s already much higher than before—and they will never really pursue negotiations. And so we’ll just get used to the idea that these negotiations are ongoing. At some point, they will all or not be completed, but trade will basically go on.
Even as things are today, average US protection is very high—higher than it has been at any time since the 1940s. So, it’s very protectionist, and it will affect world trade. But I find it inconceivable that they’re going to impose—or reimpose—all those tariffs. So, I’m relatively optimistic that the peak craziness has passed.
Q: Do you think India is in a particularly advantageous position because of Donald Trump’s and America’s dislike of their dependence on China? It looks almost axiomatic now that India may have, say, 10-15% tariffs after the negotiations, but China will face 30–35%. It doesn’t look like it will be any less than that. So, does that big 20% tariff difference make India an attractive destination for textile companies, for Nike, for Adidas? Will investments come?
Wolf: There’s an upside and a downside. Trump has reintroduced what trade policy analysts call “discrimination” into trade policy. This is one of the most obvious ways in which he’s broken fundamental principles of the WTO. But if you have the benefit of discrimination in your favour, that’s obviously good for you.
So potentially, this gives India an opportunity to expand its exports of products that compete with what other developing countries can supply and to make it a more attractive base for foreign direct investment, particularly by US firms. And this is reinforced by the sense that the Trump administration, and America more broadly, looks more favourably on India politically than it does—very clearly—on China. So, these are assets for India.
The questions, however, are always the same: Do outside investors find India a really attractive place to put investment? And that depends on the quality of infrastructure, the quality of labour, the way Indian legislation and the labour market work. Do they feel that India is now a place where they can operate as easily as they can in China? And I would say that’s beginning—but we’re not there yet.
So, there’s the domestic base. And then, of course, the other thing is, they have to ask themselves: “Okay, we’ve seen all this instability in trade policy. If we’re going to set up a new factory—that’s a big investment—we’ll need five to ten years to recover that.” So, they need to know not just whether they have the preference today, but how long it will last. And it’s a reasonable bet that India will be favoured over this period. But trade policy can change, as we’ve seen.
So, the big thing that Trump has done in trade policy by breaking all the rules is inject profound uncertainty. What you’re seeing—and what you’re getting—is based on the whims of one man. I would say India is in an advantageous position. It’s an important country. The Americans recognise this. But you also have to recognise the President is a very impulsive and unpredictable man. So, I would say you can’t be completely sure of it.
And that is why I emphasise: the fundamental resource of a developing country is its competitiveness. Relying on tariff privileges—rather than being actually the lowest-cost producer in the world, which is basically what China has become—is a bit risky. And I wouldn’t push it too far.
Q: Fair enough. Things are moving in the right direction. You’ve seen a reduction in taxes, a reduction in interest rates, cost of capital coming down. I mean, there are several things.
Wolf: A lot of things have happened. India is incomparably more competitive than it was 20 years ago. This is obvious. But that remains very important. You cannot just rely on the idea that America doesn’t like China and will lock it out of its markets forever. Things can change.
Watch accompanying video for entire conversation.