Good morning,

I'm reading the RBI December bulletin, which has basically the best analysis on India. What's interesting is that while India recorded record high growth (+8.2%YoY), nominal GDP slowed massively to 8.7%. If we look at the recent high frequency indicators, they are not good. GST revenue is slowing sharply, electricity demand is negative, and petro consumption also very soft.

What that means is that we got rather weak nominal outcome of growth irrespective of strong real GDP growth. And that matters because it impacts government revenue, earnings and of course income.

The INR has been fretting this reality as export sags and thus exporters are not in a hurry to sell USD. Meanwhile, foreign investors are looking at the expected depreciation of INR vs USD while other FX appreciates and that means that while real yield in India is attractive, its return in EUR for example was negative last year for European investors.

So what's next? Btw, if you want to see some positive demand indicator, you will find it in autos/two wheelers. GST reduction has boosted auto sales. But that is not all.

If you zoom out, India auto sales are one of the few bright spots in Asia for auto sales (China also high but given lower prices, profits sag).

Good afternoon,

Have you read Trump's team National Security Strategy or Donroe Doctrine?

Shall we read together? It has four sections.whitehouse.gov/wp-content/upl… First section is easy if you read the Miran paper. Basically it talks about where America went wrong, as in miscalculated ability to shoulder global burdens that divorces from Americans' national interest.

Where did they go wrong? First, massive welfare state, huge military, intel, aid complex. Second, misguided idea on globalism and free trade that hollowed out the middle class. And a lot of US institutions don't support national interests but transnational interests that undermine sovereignty.

"The new approach is rooted in a core belief in Beijing: that Trump is fundamentally transactional, not ideological. Policymakers believe they can use Trump’s zest for a deal to neutralize the China hawks in his administration."

But Trump is a trade hawk. He has had the same view since the 1980s no matter what the "experts" have said. He is ideological in this point of view. He sees manufacturing as key to economic strength, the same as Xi actually.

https://x.com/Trinhnomics/status/1981537465157538079

Interesting to look at Xi and Trump meeting to compare Stalin and Franklin Roosevelt meeting at Yalta. Stalin had UK spies telling him all about the "red lines" for the UK and the US. So he came to the meeting totally prepared. Stalin was willing to give the US the "red lines" but in return, he took everything else, including territories in Japan, a foothold into Asia via China, and finally Eastern Europe, including Poland, where Churchill was busy drinking and talking too much to achieve much. This paved ways for Mao and the Communists to emerge in China. And the rest is history.

So does Trump have "red lines" that Xi know? If so, to get that, what would Xi ask in return? Interesting to see this playing out. Irrespective, we are entering strategic decoupling at great speed deal or no deal.

Good question. Let me just answer this with below tables.

First, whatever China lost in market share in exports to the US, Vietnam has gained. The best example is in mobile phones.

Now, is it REROUTING? As in just Chinese phones that are then trans-shipped to the US?

https://twitter.com/stevehou0/status/1978379197115519049

First, we have to realize that Vietnam went through two stages of FDI.

The first stage is driven by NORTH ASIANS that are basically fed up with geopolitical tensions and too much competition from China (think Japan in 2010 w/ rare earth and South Korea with THAAD but even before) and so what do they do?

They MOVE their production base slowly out of China into where? Well, for South Korea, it was Vietnam.

Samsung Electronics moved into Vietnam in the early 2000s to the point now more than 50% of their stuff is exported out of Vietnam. But not only. Many other Korean stuff.

Also Japanese etc. So what you see in the telecom here is not CHINESE PHONES but KOREAN PHONES.

The second wave of course is Chinese outward FDI themselves and also increasingly EUROPEANS.

Anyway, let's talk about phones.

Did you know that Vietnam's Q3 GDP grew 8.2%YoY and Q2 was 8%? It is one of the few countries in Asia where manufacturing share of GDP is rising even as Chinese imports flood the market. Why?

“In contrast to other countries that are stuck in political paralysis, Vietnam has moved very swiftly to secure lower tariffs and reform its economy to increase productivity and competitiveness,” @Trinhnomics , a senior economist at Natixis SA, said. “This has allowed Vietnam to emerge as a winner under Trump 2.0 despite high tariffs because it’s favored as a foreign direct investment destination for those wanting to diversify away from worsening US-China tensions.”

bloomberg.com/news/articles/… Look at manufacturing across Asia and what do you see? Its down for India, Malaysia, the Philippines, Thailand, Indonesia.

But not Vietnam. It's up. The fact of the matter is Vietnam faces a widening trade deficit with China but at the same time it has turned that into an overall trade surplus, which means that Vietnam value add has risen over time.

And you can see it clearly in its manufacturing share of GDP or global market share. Has been slowly steady climb.

Rare earth is in the news again. Of course it is not rare, just that you gotta dig deep and then obvs process it. That entire process is polluting, costly and the output itself doesn't yield a lot.

That's how China has captured the market. It's willing to do polluting working and basically sells more not a lot. But having cornered that market, it also sees it as leverage, which it has used since 2010 (with Japan). The weaponization of supply chain is what we call it.

The free market economics of it makes sense for people to just leave it to China to do rare earth & then focus on the more market profitable business. Until, well, dun, dun dun. So how should a firm or government view rare earth? Should you go and pay HIGHER price than what the Chinese rare earths are going for to then secure resilience of supply chain?

Most say, well, "Nah." That is a costly move because well, others will outcompete you with cheaper Chinese inputs while you go dig and refine your rare-earth magnets. Not an economically worthwhile endeavor.

But not everyone has taken that decision. Here is a story of a company that didn't: General Motors.

Here we go, as I'll go on TV soon with @JoumannaTV to discuss data, let's take a look at China September trade data that just came out.

September exports rose 8.3%YoY in USD and imports increased 7.4%YoY.

Year-to-date, exports grew 6.1% while imports declined -1.1%YoY. By destination, China exports to the US fell -16.9% but to Asia rising rapidly.

Exports to India rose 12.9% and India deficit with China is accelerating, with imports not just intermediates for production but also final consumer goods.

Shipment to ASEAN rose 14.7% with fastest growth to Thailand and Vietnam (+22.5% and 22.3%, respectively). The sharp increase of shipment reflect supply chain diversification but also rising imports for domestic demand in ASEAN that also poses challenges to domestic industries.

Exports to the EU rose 8.2% with shipment to Germany increasing +10.5%.

Interestingly, China exports to Russia has fallen this year by -11.3% as Russia puts up curbs to some Chinese exports.

Should the US drop quarterly earnings? Well, the UK doesn't require it and neither does the EU.

Is it a controversial idea? Many people think it's a good idea to ditch it, including BlacRock CEO Larry Fink.

Fact: Hillary Clinton is also not a fan of quarterly earnings requirement.

It's one of the reforms people think will reduce shorterm-ism that is rather bipartisan.
ft.com/content/d5d463… Here is Hilary Clinton going off against quarterly earnings.

Interesting that they got only quotes in that article of people thinking it is a terrible idea to get rid of it.

A lot of people think getting rid of it is a good idea.

Btw, companies can still report quarterly earnings. The SEC is saying you don't have to if you don't want to in proposing it.

European companies report quarterly earnings. Some don't. It's the optionality that's key.

theguardian.com/business/us-mo…

Despite the 50% tariffs imposed by Trump, India's future is more trade & not less & why tariffs will need to go down.

Here we go, a thread.

https://twitter.com/ThePrintIndia/status/1960211274694005159

From winning the Trump trade war, India is now the US President’s biggest target. The Trump administration imposed a 25% tariff on India. To add insult to injury, Trump announced another 25% tariff, effective tomorrow, on the grounds that India imports crude oil from Russia.

Indian goods bound for the US will now face tariff rates similar to China’s if we include the Trump 1.0 tariffs, making any China+1 strategy in India less competitive for US markets, and relative to Southeast countries, which for the most part face tariff rates of about 20 per cent.

Eight months after Trump has been inaugurated and we of course have now the EU US deal. What do we know about Trumponomics?

I would say my read is the Miran paper is a blueprint for Trump actions so far on trade. Let's see what I mean by that. And this has consequences of how Trump sees India, which I think is not just escalation to gain leverage. First, let's talk about an important ally, the EU. The details are out and I would say this is actually rather good for the EU in the context of out of control Trump tariffs.

Why? EU tariffs are NOT stacked. They are ceilings. As in, they get 15% max, including sectoral tariffs like auto (including car parts), pharma, semiconductor, lumber etc but not steel & alum, which they are still trying to negotiate. There are some additional exemptions for EU products such as aircraft, parts, generic pharmas & ingredients etc.

Russia import imports since 2022. If this calculation is correct, the arbitrage is USD2.5/barrel currently, then annual saving is USD1.5bn. India trade balance with BRICS: It buys way more than it sells.

Some say more BRICS is the answer. But looking at trade as it is right now, what needs to happen?

Guys, let's do it. All things Trump tariffs. Here we go. First, let's talk about the basics. 10% is the floor as in everyone gets that. And these are the economies that get higher than that:
15% (EU, Japan, South Korea and 33 countries: Angola, Botswana, etc.)
18% (Nicaragua)
19% (Cambodia, Indonesia, Malaysia, Pakistan, Philippines, Thailand)
20% (Bangladesh, Sri Lanka, Taiwan, Vietnam)
25% (Brunei, India, Kazakhstan, Moldova, Tunisia)
30% (Algeria, Bosnia and Herzegovina, Libya, South Africa)
35% (Iraq, Serbia)
39% (Switzerland)
40% (Laos, Myanmar)
41% (Syria) In Asia, it looks like this. Excluding China and Myanmar, Laos, India got the highest - 25% and maybe more.

China is waiting for talks on extension. Right now, it's 10% reciprocal + 20% fentanyl during extension + 25% during Trump 1.0

Southeast Asia gets 20% to 19% except Laos & Myanmar at 40%, Brunei is 25% but energy is exempt so...

Trump tariff strikes India at 25% plus Russian oil import punishment. Is it a surprise? Not exactly. I have been thinking for a week what a US India deal look like. And to be honest, I think I saw this coming. I think India can negotiate down from this threat btw. It's not final. But how much lower and what are the costs? Why is it not a surprise that India is not getting the deal that it is working hard on?

First, let's look at the EU and Japan - they got smacked with 15% tariff & got reprieve for auto (and other sectors) but auto is key at 15%.

So 15% is the best India can get. And it won't get it. Why? Well, it has to offer a lot to Trump to get that and it won't.

India imported 15,000 cars a year. Why? It has 110% tariff on autos. Now, trade negotiations are not going well and it's approaching the WTO on Trump's 25% auto tariff.

But the reason is simple. India exports more than it imports autos. Why? It has pretty high tariff on auto.

What would an India trade deal look like then? Is there going to be one? What's interesting is that the UK and India signed a trade deal that is supposedly a huge game changer.

Let's take a look at it.

Under the agreement, tariffs on imports of internal combustion engine (ICE) cars will be slashed to 30-50% in the first year of implementation, but with the benefit limited to a quota of 20,000 cars.

The tariffs will be reduced gradually, and after 15 years, they will become 10 per cent, with the quota set at 15,000 units. For out-of-quota imports of ICE cars, the duties are reduced to 60-95 per cent in the first year, and further to 45-50 per cent from the tenth year onwards.

Reading this article with great amusement with tons of comments that are so emotional & not backed by why. And they all seem so surprised on outcome. I have been saying this all along - the pass-through of tariffs are not as you think it will be. Why? Because you need to understand how they work & who has the negotiating power.

First, this statement here: "China’s retaliatory tariffs on American imports, the most sustained and significant of any country, have not had the same effect, with overall income from custom duties only 1.9 per cent higher in May 2025 than the year before."

ft.com/content/82e32f… I mean, it seems to admire China's retaliation, as in it, that is the great thing to do.

Why didn't China collect more import duties even though it retaliated?

Well, because China is not GROWING its imports. It's exporting its deflation.

So its retaliation doesn't have as much "meat" so to speak. They need to sell more than they need to buy.

Let's talk about India today. I'll be on @CNBCi at 11am HKT to discuss this particular issue.

First, we all know that India is amongst the least trade exposed and least exposed to the US amongst the big traders.

That being said, the US is the MOST lucrative export market and one it MUST grow if it wants to GROW OUTWARD AND UPWARD through trade.

Why? Look at China PPI today - it's is -3.6%YoY. Look at the Chinese yuan. It is not appreciating like crazy versus the USD. So what? China manufacturing is TOO competitive and will COMPETE with India so exporting to China is not a HIGH MARGIN BUSINESS.

That is the same for everyone who is a big trader. China is a competitor. So fierce that even the Chinese government is struggling w/ this onshore deflated PPI situation so you can see why foreign competitors are pissed off. First, let's zoom in - India's export as a share of GDP is roughly 2.5% of GDP in 2024. As mentioned, 0.8% is exempted now (pharma, electronics etc). But EXEMPTIONS ARE TEMPORARY. Today, we got threats of 200% tariffs on pharma for example.

Anyway, 1.3% of GDP faces 10% tariff now that will go up to 26% by 1 August if not successfully negotiated down.

India is not too exposed by Trump auto and steel but still somewhat.

Good morning,

As promised, here is a thread on Trump trade war and what Asian countries are going to do or shall I say who has more room to give Trump a deal than others.

@Trinhnomics interview at 17 mins. First, let's start with one certainty: Trump tariffs are higher, and they are on sectors (50% steel, 25% alum, 25% auto & more under study), countries (China 20% fentanyl, Canada & Mexico 25% fentanyl w/ USMCA qualified products 0%, and of course 10% reciprocal tariffs on everyone w/ extension ending 1 August for everyone & China 9 August.

Okay, so what?

Good afternoon,

Yes, it has been a while. I have been running around the world & Asia. It was nice seeing so many people and places to share views, but my inner nerdling self fundamentally enjoy sitting at desk listening to music to read and analyze. For those that I got a chance to meet, thank you! People make the world go around - we all yearn to understand our reality & seek to be understood.

Anyway, shall we review first half? And perhaps think about second half 2025, which starts Tuesday next week. First, we live in a Trump world. By that, we can't escape his decisions, pushing, wanting.

What does he want? That is a question I get a lot. And most people tend to response with this, "He probably doesn't know it himself."

I don't agree. He does. He's clear about it. It's how he gets there and the people that he surrounds himself with to execute it is a big if but not what he wants.

I'll put three things that Trump wants and basically got so far despite everyone calling him TACO (Trump always chickens out).

Good morning,

Happy to be back in Hong Kong! The world is on fire, this time, the threat of war widening beyond just Israel and Iran but to the US and that means the gulf.

Meanwhile, Japan sees core inflation rising to 3.7%YoY and this forces the BOJ to hike (it really doesn't want to for many reasons) as it struggles with policy response - note that inflation has been higher than 2% for so long while policy rate is only 0.5%.

So who is most affected by this whole conflict? Well, we all in different ways but the most obvious outcome is oil. Let's take a look.

We Asians IMPORT 69% of oil going through the Straight of Hormuz and the Saudis export the most. First, let's go through what's happening. Iran has been attacked by Israel and has shown that it is weak. Now that it is weak, it will have to fight back strongly or risk being seen weak.

So it's a question of how it will surrender not whether and when. Will it do that to the US or Israel? It will fight first. Second is the US, will they take this opportunity to wipe out the threat of Iran nuclear power?

If the US is involved, there is a chance of this widening out as US assets in the region will be targets.

Hence the question of the Straight of Hormuz.

Good morning Hong Kong,

Happy to be back in Asia. Paris was great for many reasons - but mostly because the vibe in Europe is much better as people feel more empowered by change that allows people to zoom out from usual distress over political stalemate, even if challenging.

What do I tell clients? Well, the same as I usually do. When you look at data, don't get fixated on a point in a series. Non-farm payroll/jobs data is an example. Markets get so fixated on what the expectations are & whether results are a beat or not. But what we should look at is a trend over time. Revisions happen. Downward revisions or upward. Seasonality happens (strikes/weather/etc). But what does the trend tell you & what does that mean for policy reaction function? Well, if you zoom out, then what we see is that job gains are SLOWING in the US. And labor market data is lagging.

The ISM, both manufacturing and services, both point to slowing activity.

Meanwhile, we have CPI coming out in May - markets expect 2.5%YoY from 2.3% in April.

So what? What will le Fed do?

Trump tariffs. Where are the powers coming from? Well, he has a menu of tariff options. It's the only tax that the president can incur without congress.

For Reciprocal Tariffs, he used the International Emergency Economics Power Act (IEEPA), which has an advantage of SPEED and SCOPE but disadvantage in FOUNDATION or legality.

Why? Well, he declared that the TRADE DEFICIT is the national emergency.

The US Court of International Trade said that he MISUSED the IEEPA, as in the foundation of the "emergency" is not right. Trump team knew this. They know the laws. They decided for SCOPE and SPEED. What happens next?

Well, they appeal. And eventually, it will be the Supreme Court that will decide. But the foundation of his "emergency" was always being questioned.

Irrespective, for markets, there was already a Trump put, and a clear one. He himself sees these "reciprocal tariffs" as maximalist positions anyway.