Jim O’Neill: India’s tariff fight may open a surprising new door to China

India’s tariff shock may rattle markets in the short term, but deeper shifts in global alliances—and a possible diplomatic opening with China—could reshape the country’s long-term trajectory, says former UK minister Jim O’Neill in an interview with ET Now.

O’Neill, former UK Treasury Commercial Secretary and ex-Chairman of Chatham House, called the 50% tariff imposed on India “a major surprise,” warning that markets have not fully priced in its impact. “Who would have dreamt back in February that this is where things might have settled on tariffs for India?” he told ET Now.

Yet O’Neill believes India’s domestic demand-driven economy remains a key strength in a volatile global environment. “The challenge will be to absorb the tariff shock while continuing to capitalise on domestic growth,” he said.

A notable pivot in his remarks was the potential thaw between New Delhi and Beijing. “If Prime Minister Modi’s outreach to Beijing produces even small positive shifts, it could add a new dimension to India’s long-term story,” O’Neill noted, suggesting that regional recalibrations may become more prominent as globalisation loses momentum.

He pointed to growing inflation and interest rate risks in developed economies and warned that global equity markets, buoyed by the AI boom—particularly around Nvidia—are overlooking structural dangers. “I’m not as comfortable as equity markets seem to be, in India or elsewhere,” he said.

On the macro front, O’Neill reiterated his longstanding prediction: U.S. equities may underperform the rest of the world this decade. “Trump’s policies are weakening the dollar and American institutions. Countries like India are being forced to rethink global alliances and lean more on domestic and regional growth.”

Indian markets, after a strong run, have seen a recent pullback—something O’Neill sees as a healthy correction. “India was showing signs of excess, especially in equity derivatives. Valuations now look more reasonable, though not cheap,” he said.