India well positioned to navigate US-China tariff conflict: BlackRock

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Longer term, emerging markets like India are well-positioned to capitalise on mega forces and navigate the US–China competition, said a report by BlackRock Investment Institute.

The investment manager favours emerging markets over developed markets, especially EMs at the cross current of mega forces, like India and Saudi Arabia.

According to a paper published by the institute earlier this year, India’s rapid growth rate underscores its economic ascent while also bringing to light challenges ahead: “Supercharged digitisation that has revolutionised financial transactions, favourable demographics and India’s relative success in navigating a geopolitically fragmented world brighten the long-term outlook, we think.”

US-China competition

In China, fiscal policy is turning supportive, yet the threat of tariffs calls for caution. US-China competition is set to intensify in 2025 as tariffs and policies focused on decoupling strategic sectors, especially advanced technologies like semiconductors, accelerate. China’s cheap low-carbon technology, especially electric vehicles, solar and batteries, is putting pressure on companies in other major economies, spurring a protectionist response.

“China’s fiscal stimulus is not yet enough to address the drags on economic growth, but we think stocks are at attractive valuations to DM shares. We stand ready to pivot. We are cautious long-term given China’s structural challenges,” said the report.

AI theme

BlackRock is overweight US equities as the AI theme and earnings growth broaden. Valuations for AI beneficiaries are supported by tech companies delivering on earnings. Resilient growth and Fed rate cuts support sentiment. Risks include any long-term yield surges or escalating trade protectionism.

“Some US equity valuation measures, whether price-to-earnings ratios or equity risk premiums, look rich relative to history. But they may not tell the full story. The equity market’s changing sectoral composition reflects the transformation taking hold. We think the AI mega force will benefit US stocks more and that’s why we stay overweight, particularly relative to international peers such as European stocks,” the report said.