Aziz said the 7.8% growth India recorded in the first quarter was below JPMorgan’s 8% expectation and was supported by factors including RBI rate cuts, regulatory easing for non-bank financial companies, strong credit growth and GST tax cuts. As these temporary supports fade, he said the economy could lose some of its current momentum.
Aziz said India’s goods exports remain particularly vulnerable to potential US tariff action, with the uncertainty over the timing and scale of any increase making it difficult to assess the impact on the economy. He said tariffs could be used as a negotiating tool, even if the eventual increase falls well short of the 100% level being discussed.
Luis Oganes, Head of Global Macro Research at JPMorgan, said a move towards 100% tariffs could initially push crude oil prices sharply higher, potentially towards $120-$130 a barrel, but he does not expect such a spike to last for long as Russian oil would eventually find alternative routes to global markets.
Oganes said JPMorgan is more concerned about oil products such as diesel and jet fuel than crude itself, particularly as higher fuel prices are already putting pressure on US consumers.
He also expects oil-driven inflation pressures to remain a concern and believes the US Federal Reserve may need to deliver at least one more rate hike in December.
Read Here | ‘Don’t punish India over Russia’: JP Morgan’s Jamie Dimon urges US to rethink oil tariffs
These are edited excerpts from the interview.
Q: I was just checking the CME FedWatch. There, the expectation is for at least three more hikes, based on the voting. But Jahangir, to finish this theme of likely higher tariffs in India, India’s growth has surprised on the upside in the first quarter. We saw 25-30% auto sales growth. We have seen 19% credit growth. So, several non-government indicators are very strong. But my fear is that some tariff increase will come. Would there be such a huge bipartisan support in the two houses, with nothing happening on the tariff front? So, what should we be prepared for, and will that hurt growth in India?
Aziz: Obviously, goods exports are the one that are in the line of fire. The issue with the Russia sanctions bill is that, unlike the International Emergency Economic Powers Act (IEEPA), unlike Section 301, both IEEPA and Section 301, the court’s interpretation was that if it is not in the law, they will not allow the president to take any actions.
Tariffs were not mentioned in IEEPA, and therefore tariffs were not allowed under IEEPA. In Section 122, which again the US government lost, it didn’t go to the Supreme Court, but went to the appellate court, the argument was that, look, it says there has to be a balance of payments crisis. There is no balance of payments crisis in a flexible exchange-rate system. Therefore, you cannot use that as a basis.
This, unfortunately, is in the law. So, the protection that importers in the US have, against the use of such tariffs is not there anymore.
So, even if it doesn’t go to 100%, there’s no reason for it to go to 100%. Most likely, it will be used in negotiating with India. I am not exactly sure whether that will happen before the midterm elections, or after the midterm elections, or two years down the road, three years down the road. The Russia sanctions bill doesn’t say that there is a time limit. In 2035, the US can say, ‘Well, in 2025 you used…’
Q: We are taking some strength from the fact that President Trump’s term ends in a couple of years. But the point is, in calendar 2027, should we be prepared for higher tariffs?
Aziz: Be prepared for higher tariffs as long as this government is in power, because higher tariffs are the manner in which it negotiates everything. So, whether you are Canada or Mexico, whether you’re renegotiating the United States-Mexico-Canada Agreement (USMCA) or Europe, you should always be prepared for higher tariffs, because that’s the modus operandi since 2016.
Q: There is a growth downside, possible downside for India, at least when it comes to tariffs?
Aziz: India’s growth has nothing to do with the tariffs. Why are you attributing this growth to tariffs? This growth, 7.8% growth, we were disappointed. We had expected 8% growth. We were disappointed because in the previous six to nine months, the RBI had cut rates. There was massive regulatory easing on credit to non-bank financials. Look at what has happened to credit growth, and the GST tax cuts were coming.
India was on a sugar high. That’s the reason we had 8% growth there, not because there was a methodological change. Like every sugar high, the sugar high can disappear. So, I would be concerned much more with that than with tariffs.
Q: I agree. I’m just trying to say that the other things are factored in by economists, such as the fact that the sugar high will go away and that the GST base kicks in. All that we are aware of. But I don’t think everybody has factored in this tariff hike.
Aziz: Because there’s uncertainty, whether it’ll be 10%, 20%, 100%, we have no idea. When will it happen? We have no idea. So, it’s very difficult for economists to go and say when it is going to happen.
Q: The most important worry for the markets, but which it is not worrying just yet, is this 100% tariffs likely if the Russian sanctions bill is taken literally? Just give us the two scenarios. If Trump goes through with the 100% tariffs on China, India, or at least on India, what is the impact on crude oil prices and crude derivatives, and if he doesn’t, what is your expectation of crude prices?
Oganes: Our expectation is that he cannot follow through with that threat because the impact on oil prices would be so high, particularly at a very sensitive time with the midterm elections coming up in the US, it would be the wrong time to do this.
Granted, we are all discussing whether this actually provides a policy limitation or not, because if you think about the tariffs on Canada, you would think, well, ahead of the midterm elections, why impose them? Yet the president went ahead with that.
So, for the sake of argument, if something like that were to be imposed, obviously there would be another potential pressure point on the energy market.
Q: Could oil go to $150? Is there a scramble if India, which buys around 30% from Russia based on the FY26 average, has to bring that oil into the global market? What are we looking at?
Oganes: What you will see in terms of the impact is that an announcement like that would potentially push prices. I don’t know if it is $120 or $130. However, I don’t think it will stay there for too long, because oil is a physical market. Somehow, oil finds a way to reroute itself and go where it can in order to reach the end consumer. It will take time, but eventually you will see Russian oil finding its way back to the market somehow.
Q: What about diesel and petrol? Because India is refining a lot. In fact, some people have described India as the global refiner.
Oganes: That is a more concerning issue for us, and that even goes beyond the issue that you just described about imposing tariffs or trying to restrict oil flows.
Q: Because it’ll hit the American voter, right?
Oganes: Already diesel is at $6 a gallon in the US. It has become a pressure point. There is some discussion among Republican politicians about asking the US government to start restricting exports of diesel just to have lower prices onshore.
We are a lot more concerned, to be honest, about what we call oil-product cracks. This is diesel, this is jet fuel, this is all kinds of oil derivatives, rather than crude itself. That is where we need to be a lot more cautious.
Q: And since that will hit at the pump, the expectation is that at least until the midterm polls the president won’t move because higher petrol and diesel prices would directly hit the consumer?
Oganes: That is already happening, and that is one reason why the Fed has had to hike. Inflation expectations are already under pressure, and that’s why we think that regardless of what happens with geopolitics in the coming months, the Fed probably still needs to deliver at least one more hike in December. Let’s see what happens next year. But the pressure points from inflation coming from oil prices are certainly real.
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