This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

Saint-Paul-lez-Durance is a small town of about 1,000 people in the south of France, featuring a picturesque 15th-century château and a handful of shops.

Yet, its quaint charms were not the only reason that attracted Indian Prime Minister Narendra Modi this week. Saint-Paul-lez-Durance is also home to Cadarache, one of the world’s preeminent centers of nuclear research.

The thermonuclear visit comes after Finance Minister Nirmala Sitharaman set aside $2.3 billion in the federal budget earlier this month to promote the development of nuclear power generation in India.

“This initiative aims to enhance domestic nuclear capabilities, promote private sector participation, and accelerate the deployment of advanced nuclear technologies such as Small Modular Reactors (SMRs),” the government said in a statement.

Small modular reactors, that produce under 300 megawatts of electricity, have been touted as the answer to several challenges the nuclear industry faces. The industry says SMRs, which will be manufactured in modules elsewhere and assembled onsite, will reduce construction time and cost, which have tended to come in multiple times the initial estimates.

In fact, the government says it will build five modular reactors in under a decade using the funds, helping it reach its self-imposed 100-gigawatt nuclear energy target by 2047. Nuclear energy accounts for about 3% of India’s generation capacity currently, with plans to increase capacity from 6.7 gigawatts to 22.4 gigawatts by 2031.

While the goals are certainly ambitious, the challenges look daunting, if not outright impossible to overcome. The International Energy Agency and investment banks Bernstein and Royal Bank of Canada, for instance, say India’s nuclear ambitions are quite simply unachievable.

Even with China’s track record for infrastructure development, it took the country about 15 years to set up its first modular reactor Linglong One. Analysts say it will be “pleasantly surprising” if India were to beat this time scale.

“While it absolutely merits a whole-hearted attempt on India’s part – from a stock market analyst perspective it is too far to be … priced in today,” said Bernstein analyst Nikhil Nigania. “There is a low likelihood that even [one] indigenous SMR would be operational in India by 2033 against [the five the government] has planned.”

Atomic lawsuits

India may also have also stumbled on the first step.

A tender for a 220-megawatt Bharat Small Reactor, which isn’t modular, puts all the financial risks of building a nuclear power plant onto the private sector — under the “Civil Liability for Nuclear Damage Act” — while the state-owned power company NPCIL retains many of the benefits, including ownership and control of the power plant.

The CLND Act, which sees companies and their suppliers on the hook for any nuclear accident in India, is viewed by some industry experts as the bane of the private sector. They say if it were not for the law, construction of the world’s largest nuclear power plant would now be underway in India.

French-state-owned nuclear giant EDF, which operates more than 60 nuclear power stations in France and the U.K., submitted its plans in 2021 to build six reactor units that would generate 9.6 gigawatts of carbon-free energy. Yet, earlier this year, it said the existence of the CLND had prevented it from pushing ahead.

“In addition to the country risk, which includes a substantial tax dimension, the conditions related to the scope of nuclear liability in India must be met, and the project’s financing plan must be secured before the final contracts are signed,” EDF said in a bond prospectus document issued earlier this year.

U.S. nuclear giant Westinghouse Electric Company, meanwhile, proposed to build six 1,200 megawatt AP1000 reactors, which have been tried and tested in the U.S. as well as in China, more than a decade ago. Yet, no progress has been made on the deal since then.

“Westinghouse, the supplier of high output nuclear power plants, remains skittish about sales to India with the absence of durable assurance of limited liability in the event of an accident,” said Ashley Tellis, senior fellow at the Carnegie Endowment for International Peace in 2023.

The concerns have not gone unnoticed. The Indian government has said it intends to amend the laws preventing companies like EDF from entering the nuclear sector.

“For an active partnership with the private sector towards this goal, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up,” said Finance Minister Sitharaman in the budget speech to Parliament.

Amending the statute books is just a first step for India, however, as it looks to make some headway in meeting its nuclear goals.

Scarce land

Another key factor holding up the construction of these rotund machines has been finding suitable land. Nuclear scares of the past, including the Fukushima nuclear disaster of 2011, have repeatedly been used by locals to protest against having plants built in their backyard.

The foundation stone for the 1.4 gigawatt Gorakhpur plant in the state of Haryana was laid in 2014, for instance, yet it is not expected to produce a single joule of energy until 2032 — 18 years later.

But India is also learning from its experience.

Since finding land — and seeking a myriad of approvals from stakeholders — is one of the most time-consuming processes, new plants currently in the planning stages are being deployed in a cluster of six giga-sized reactors.

Most of India’s existing plants are geographically dispersed and only have two or four reactors that have sub-gigawatt production capacity each. The government now has about 6.5 gigawatts worth of reactors currently under construction that are all extensions to existing nuclear power plants, which require fewer permissions.

Today’s long timelines don’t mean it’s always been this way. The country has previously built reactors within five years, simply by replicating known technologies on existing nuclear plant sizes.

The private companies

Private companies currently involved with nuclear power projects — limited to only the non-core elements of a reactor — are also helping make the construction process significantly more efficient.

For instance, earlier this month, engineering firm Larsen & Toubro delivered the steam generators that are expected to be installed at the Kaiga Atomic Power Station in the southern state of Karnataka ahead of schedule.

“L&T is committed to deliver 6-8 nos 700 MWe Steam Generators every year and for the success of 220 MWe Bharat Small Reactor (BSR) programme to ensure net-zero carbon emissions by 2070,” said Anil V Parab, senior executive vice president of L&T Heavy Engineering in a statement.

Another way to cut timelines, and increase the odds of achieving India’s ambitious goal, is to partner up with foreign entities, such as France’s EDF, for technological expertise, according to analysts.

Russia supplies the underlying technology for the vast majority of India’s nuclear plants, while France and the United States are leading operators of nuclear energy reactor fleets.

Would it come as any surprise if nuclear was on Modi’s agenda while visiting Paris and Washington this week?

— CNBC’s Michael Bloom contributed reporting.

Indian Prime Minister Narendra Modi is meeting U.S. President Donald Trump. The meeting is scheduled for Thursday and will take place in Washington D.C., where Modi will discuss topics such as efforts to avoid a trade war and artificial intelligence policy, CNBC has confirmed. Other than Trump, members of his administration will also be present, including Elon Musk, with whom Modi will have a one-on-one meeting.

Inflation falls for the third straight month, paving the way for rate cuts. India’s headline inflation dipped year-on-year for a third straight month to 4.31% in January. Economists expect cooling price growth will provide the central bank more room for monetary easing after the Reserve Bank of India cut rates for the first time in nearly five years last week.

India’s growth story still relies on coal. A focus on economic and infrastructure development in India is boosting the country’s cement and steel industry, which rely heavily on the fossil fuel. Moreover, extreme heat is raising energy demand, even as India’s clean energy sources are not coming online at a pace fast enough to meet needs, said Dorothy Mei, project manager for Global Energy Monitor’s Global Coal Mine Tracker.

‘Quality alpha’ in India’s market over the next nine months. The strong flow of domestic capital in India’s market is compounding its growth, Lincoln Pan, partner and co-head of private equity at the Asia-focused alternative investment firm PAG, told CNBC’s Emily Tan at a “Delivering Alpha” event in Hong Kong last month. That gives Indian markets an advantage over those in China, which are still uncertain, said Pan. He also pointed to the private equity space in India as “an area of growth.”

Indian stocks have declined for seven days in a row amid rising uncertainty over tariffs. The Nifty 50 index has fallen by 2.2% so far this week and is in the red by 2.66% for the year.

The benchmark 10-year Indian government bond yield has stayed relatively flat at 6.70% this week.

On CNBC TV this week, India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri discusses India’s economic growth, its energy policy and U.S. sanctions on Russian oil with CNBC’s Sri Jegarajah on the sidelines of the India Energy Week conference. “We play by the rules. If there is an international sanction, which is anchored, we would not want to go around it or anything,” Puri said, referring to India’s purchase of Russian oil amid Western and G7 sanctions on Moscow’s energy exports.

Meanwhile, India’s most recent budget has effectively freed up the use of household savings in India for investing in equities, said Feroze Azeez, deputy CIO of Anand Rathi Wealth. Currently, around 90% of savings in a year go into non-equity assets like debt, insurance or real estate, added Azeez, so the change could have a affect capital markets even more than any consumption boom.

Hexaware Technologies, an IT consulting company, lists Wednesday. Meanwhile, preliminary gross domestic product figures for Japan, and the second estimate for the euro zone, come out Monday and Wednesday, respectively.

February 14: India wholesale price index for January, U.S. retail sales for January

February 17: Japan gross domestic product for fourth quarter, preliminary

February 19: Hexaware Technologies IPO, Euro zone gross domestic product for fourth quarter, U.K. consumer price index for January

February 20: U.S. Federal Open Market Committee minutes for January meeting, China one- and five-year loan prime rate decision

Japanese automakers Honda and Nissan said Thursday they would terminate merger talks, ending speculation over the fate of a $60-billion deal that was slated to create the world’s third-largest auto company by sales volumes.

They said “various options” were considered including a proposal by Honda to change the structure of the merger from a joint holding company to one with Honda as the parent and Nissan as a subsidiary through a share exchange.

The two companies said they will “collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles.”

Reuters on Feb. 6 had reported that Nissan “looks set to step back from” merger talks with Honda.

Shares of Honda gained 2.14% Thursday, while Nissan’s stock slipped 0.34%.

The merger fell apart due to Nissan’s “pride and denial,” as well as its refusal to close factories, while Honda’s move to make the carmaker its subsidiary further clouded the fate of the deal, according to a Reuters report. Honda was also reportedly pushing for deeper staff cuts at Nissan.

In December, Honda and Nissan began merger discussions to create the world’s third-largest automaker by vehicle sales, with talks set to conclude in June.

In a news conference in December, Honda CEO Toshihiro Mibe had said that the deal aimed at sharing intelligence and resources and delivering economies of scale and synergies while protecting both brands.

Nissan shares rocketed 24% on Dec. 18 over media reports about the merger, marking the stock’s best day since at least 1985.

The merger was announced a month after Nissan posted downbeat results for its second quarter ended September, and revealed that it would slash 9,000 jobs and cut global production capacity by a fifth.

Separately, Honda on Thursday reported its third-quarter results, with revenue coming in at 5.53 trillion yen ($36.4 billion), up 1.4% year on year. Operating profit rose to 397.8 billion yen, a 4.6% gain compared to the same period last year.

India’s headline inflation dipped year-on-year for a third straight month to 4.31% in January, providing more room for monetary easing after the country’s central bank cut rates for the first time in nearly five years last week.

The January reading was the lowest since August 2024, and came below expectations of 4.6% from economists polled by Reuters.

While price growth cooled across the board, food price inflation declined significantly from 7.69% in December to 5.68% in January. The annual price growth for vegetables saw the biggest decline from 26.56% in December to 11.35% in January.

“Looking ahead, good soil conditions, healthy reservoir levels and a high base means that we expect food inflation to continue slowing over the coming months,” said Harry Chambers, an economist at the consultancy Capital Economics. “And with the economy in a softer patch, underlying price pressures should remain in check.”

A drop in inflation could clear the way for another rate cut by the Reserve Bank of India, which slashed the repo rate to 6.25% from 6.5% on Friday in its bid to boost a slowing economy.

The RBI is currently facing a dilemma as it seeks to prop up growth in Asia’s third-largest economy, but rate cuts aimed at stimulating growth could weaken the rupee, which hit a record low earlier this month and has been under pressure due to a stronger dollar.

The Indian currency, however, strengthened over that past two days, reportedly due to an intervention by the central bank.

RBI Governor Sanjay Malhotra said in his statement that the decision to cut rates was owed to a decline in inflation, which is expected to further moderate in 2025 and 2026 toward the bank’s target of 4%.

Full-year growth for the fiscal year ending March 2025 is expected to come in at 6.4%, according to government estimates, sharply lower than the 8.2% a year earlier. The RBI also cut its growth forecast for the current fiscal year to 6.4% — matching the government outlook. The bank had pegged growth at 6.6% in its previous estimate.

“These growth-inflation dynamics open up policy space for the MPC [monetary policy committee] to support growth, while remaining focused on aligning inflation with the target,” the central bank said Friday.

Chinese companies are enticing investors with record dividend payouts and share buybacks amid rigorous corporate governance reform, with some market watchers saying more are on the horizon.

Last year, Chinese listed firms paid out a record 2.4 trillion yuan ($328 billion) in dividends, according to data from the China Securities Regulatory Commission (CSRC). Additionally, companies bought back 147.6 billion yuan worth of shares — an all-time high.

Goldman Sachs estimates that Chinese companies’ cash distribution could hit $3.5 trillion yuan this year to notch a new high, the bank’s China equity strategist Kinger Lau wrote in a note published in early February.

HSBC’s Asia equity strategist Herald van der Linde echoed similar sentiments when asked about the prospects of another year of record-high dividends.

“I think they will continue. Companies don’t know where to put their cash. They don’t get too much from the bank, so they return it up to shareholders. This is a very big shift in mindset,” he said. 

More than 310 companies are expected to have distributed dividends exceeding 340 billion yuan in December 2024 and January alone, marking a nine-fold jump in the number of companies paying dividends and a 7.6-fold increase in the total payout compared to the same period last year, CSRC added in a statement.

The dividend yield on Chinese stocks also climbed to around 3%, the highest level in nearly a decade, Goldman Sachs’ data showed. 

Chinese stocks with high-dividend yields outperformed those in Asia’s emerging markets by around 15%, according to index data.

China’s government has been actively promoting companies to pay higher shareholder returns by providing tax incentives to them, said HSBC’s van der Linde.

Improving shareholder returns became a priority for the State Council and the CSRC in 2024. Last October, China’s central bank launched a 300 billion yuan targeted relending program to help listed companies and major shareholders buy back shares. In April of 2024, regulators also reinforced stock listing standards, clamped down on unlawful share sales, and bolstered the regulation of dividend payouts.

In August of last year, 677 listed companies reported cash dividend plans, up from 500 from the same period last year in 2023, data from the China Association for Public Companies showed.

State-owned enterprises. in particular. have been at the forefront of this surge in dividend payouts and share buybacks, noted Allianz Global Investors. Some notable companies include PetroChina, with a dividend yield of around 8%, and CNOOC Group with a 7.54% yield. 

“This is very much driven by Beijing in a move to improve corporate efficiency. When Beijing says jump, the SOEs say, ‘how high?'” said Jason Hsu, founder and chairman of Rayliant Global Advisors, adding that the Chinese government is providing Chinese companies with favorable loan rates to finance the dividend boost.

Private companies are also increasing their cash payouts as well. For instance, e-commerce giant JD.com approved a $5 billion buyback over three years in September, on top of its 1.9% dividend yield.

For large-cap companies especially, investors can count on more record dividend payouts, especially from the SOE behemoths, Hsu told CNBC.

However, China’s dividend payout ratio, which measures the dividends doled out to shareholders vis-a-vis the company’s net income, still lags behind some of its Asian counterparts.

China’s dividend payout ratio stood at 52.58% as of late January, according to data compiled by Reuters and LSEG. While higher than Japan’s 36.12% and South Korea’s 27.6% the figure still falls behind that of Australia’s 89.2% and Singapore’s 78.13%, among others.

The government’s push for high-dividend payouts boosts Chinese stocks in the short run, while also attracting long-term investors from domestic and overseas markets, said Le Xia, chief economist for Asia at BBVA Research.

However, this could also mean more cash payouts flowing out of China to offshore markets, which could exert some pressure on the Chinese yuan, Xia told CNBC. 

The higher dividend payouts are good for placating local investors in the short term because there’s really “no other place for Chinese to hold their money” aside from gold, as the country’s real estate and equities market remain in the doldrums, said Shaun Rein, managing director of China Market Research Group.

The sentiment around China’s economy and markets has been poor in recent years. An initial surge in the country’s benchmark CSI 300, sparked by a blitz of government measures introduced in September, has petered out.

“The simple way to look at it, you should be paid enough in dividends, or some other common action, for you to take the pain of the fact that the recovery might not happen in valuations,” said Julius Baer’s chief investment officer for Asia, Bhaskar Laxminarayan.

Investors are being paid for their patience, he said. “If you’re not, then it’s not worth it.”

Dividends get cash into the hands of households, and the attractive yields will draw investors back into the stock market — especially those looking for alternatives to low-yielding bank deposits, said Rayliant Global Advisors’s Hsu.

“To be paid a very high-dividend yield, while waiting for [a] catalyst, is a pretty good trade,” said Hsu.

India will cooperate with international sanctions, the country’s oil minister told CNBC on Tuesday, as markets eye future U.S. policy under the new administration of President Donald Trump.

“We play by the rules. If there is an international sanction, which is anchored, we would not want to go around it or anything,” India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri told CNBC’s Sri Jegarajah on the sidelines of the annual India Energy Week conference.

“On Russia, yes, there was a price cap, and we adhered strictly to the price cap. Going forward, if there are issues, we will address them.”

India’s refiners have been snapping up discounted Russian oil since Western and G7 energy sanctions barred many consumers from Moscow’s supplies, in an effort to whittle down Russia’s war coffers after its invasion of Ukraine. Countries not subject to the measures have been able to use insurance and shipping providers to facilitate the acquisition and transport of Russian crude procured under a price threshold.

New Delhi has repeatedly defended its purchases as a matter of national interest.

“There is no sanctioned country, first of all. It’s a lot of misrepresentation that’s taking place. Today, Europe still buys 25% of its gas from Russia. They buy other critical energy from there. So there’s no sanction,” the energy minister said Tuesday.

He also signaled that the government of Trump’s predecessor, President Joe Biden, had endorsed India’s bolstered intake of Russian oil.

“I’ve had a chat with the Americans, the previous administration. They said, please buy as much as you like. Just make sure that you buy it within the price cap. And that’s what we did,” Puri said. CNBC has reached out to the U.S. State Department for comment.

India met about 88% of its oil needs via imports between April and November 2024, little changed from a year earlier, official data showed. As of January, about 40% of those imports came from Russia, data from trade intelligence firm Kpler suggests.

In 2021, Russian oil accounted for just 12% of the country’s oil imports by volume. By 2024, that share had surged to over 37%, according to Kpler data.

The U.S. has been key in shaping global energy policy through sanctions over the past decade. In January, the U.S. imposed sweeping measures targeting Russia’s energy firms and the operators of vessels transporting oil — a move that analysts believe will make it harder for buyers like India to continue importing cheap Russian crude.

Investors have been waiting to see whether the newly installed Trump will pursue a ramp-up or relaxation of U.S. energy restrictions — critical to markets because the U.S. dollar denominates crude and oil product commodities.

Trump imposed sanctions affecting the Iranian and Venezuelan energy sectors during his first mandate and has taken an “America First” approach that could further incentivize domestic output — amid questions over the impact that threatened U.S. tariffs could have on global supply elsewhere.

Puri signaled his country would not be adverse to additional acquisitions of U.S. volumes. “If Americans are putting in more energy onto the global market, somebody asked me: ‘Are you going to buy more? I said: ‘I’d be surprised if we don’t.’ Because it’s in the natural flow,” he added.

The sanctions and trade developments are coinciding with a period when India’s oil consumption growth has outpaced that of China, contributing to 25% of the global increase in oil consumption.

“I am convinced that geopolitical tensions need to be managed,” Puri said Tuesday, noting current characterizations of supply-demand fundamentals in the oil market are “depending on whom you’re talking to and depending on where they stand on the equation,” as producers or consumers.

“A country like India, with a robust demand and a current consumption of 5.5 million barrels [per day] has a contribution to make in terms of which way the market goes. And we… we plan to use that leverage,” the oil minister added.

It’s been just over three weeks into the second term of U.S. President Donald Trump, and the flurry of announcements from the White House shows no sign of abating.

The administration is set to pause enforcement of the Foreign Corrupt Practices Act,  President Trump has removed the director of the government ethics office, and (gasp!) even the humble penny is not spared, with Trump ordering a halt to penny production. 

For investors, the dismantling of ethics regulations would definitely raise questions. How would U.S. companies now conduct themselves, especially in markets where corruption is more rampant? Will more brown envelopes be slipped under tables, all in the name of retaining or winning business? Will the rule of law be superseded by the amount of business brought in by a company?

There are no straight answers to these questions, but expect to hear experts and economists’ two cents in the coming days.

Well, at least when the penny is still around. 

— Lim Hui Jie

Altman declines $97.4 billion offer for OpenAI by Musk-led investors
Tesla CEO Elon Musk is leading a group of investors in offering to buy control of OpenAI for $97.4 billion, CNBC confirmed. The offer is for the nonprofit that oversees the artificial intelligence startup behind ChatGPT. However, OpenAI CEO Sam Altman wrote on a post on X, “no thank you but we will buy twitter for $9.74 billion if you want.” Musk then replied to the OpenAI chief on X calling him a “swindler.“ 

Asian economies scramble to appease Trump as he ratchets up tariff threats
As the specter of U.S. President Donald Trump’s reciprocal tariffs looms, several Asian economies that enjoy substantial trade surpluses with Washington are scrambling to negotiate favorable solutions with him to avoid being slapped with higher duties. Trump said Friday that he would announce reciprocal tariffs — duties that match those levied on U.S. goods by respective countries — as soon as Tuesday, to take effect immediately. 

Chinese companies are seeing a record rise in dividend payouts
Chinese companies are enticing investors with record dividend payouts and share buybacks amid rigorous corporate governance reform, with some market watchers saying more are on the horizon. Goldman Sachs estimates that Chinese companies’ cash distribution could hit $3.5 trillion this year to notch a new high.

Markets shrug off tariff fears
U.S. stocks rose on Monday, powered by major tech names and as traders looked past the latest U.S. tariff threat from President Donald Trump. The Dow Jones Industrial Average added 0.38%, led by a 4.8% gain in McDonald’s. The S&P 500 gained 0.67%, and the Nasdaq Composite climbed 0.98%. Asia markets were more mixed on Tuesday, with South Korean markets in positive territory and Chinese markets falling.

BYD rolls out driver assistance tech with DeepSeek’s help, shares reach record high
Chinese electric car giant BYD shares hit a record high in Hong Kong trading Tuesday after the company said it was debuting driver assistance technology with the help of DeepSeek. Shares rose more than 4% Tuesday morning to an all-time high of 345 Hong Kong dollars ($44.24), before paring gains. 

[PRO] Traders lower rate cut expectations
Investors are lowering their expectations even further for interest rate cuts out of the Fed this year, as they grow more concerned about tariffs and the effect they could have on inflation. Economists have warned that a wide-scale trade war could significantly raise prices, and consumers appear to be worried as well. 

What the end of the penny means for the economy, your piggy bank, and the way America prices items

President Donald Trump has ordered the Treasury to stop minting new pennies, which could have an impact on prices, cash consumers, and those coins still under your couch cushions.

Experts predict a mild inflationary impact, as more prices are rounded to the nearest five cents. People at the bottom of the economic ladder will probably feel any penny pinch the most, as they are either unbanked or unable to access debit or credit cards or a digital wallet. 

» Read more

As the specter of Donald Trump’s reciprocal tariffs looms, several Asian economies that enjoy substantial trade surpluses with Washington are scrambling to negotiate favorable solutions with the U.S president to prevent being slapped with higher duties.

Trump said Friday that he would announce reciprocal tariffs — duties that match those levied on U.S. goods by respective countries — as soon as Tuesday, to take effect immediately. Trump did not identify which countries will be hit but indicated it would be a broad effort to help eliminate U.S. trade deficits.

While the details remain unclear, “it is likely that U.S. import tariffs will rise for most emerging Asian economies,” a team of analysts at Barclays said Monday, with the exceptions of Singapore and Hong Kong, with which the U.S. enjoys trade surpluses.

Based on World Trade Organization estimates, most economies in Asia applied higher average tariffs on imports compared with the U.S. as of 2023. India led with a 17% simple average rate on countries with the most-favored-nation status, compared with the U.S. that levies 3.3%. The U.S. enjoys MFN status with most major economies, except Russia. 

China topped trade surplus with the U.S. last year at $295.4 billion, followed by Vietnam’s $123.5 billion, Taiwan’s $74 billion, Japan’s $68.5 billion and South Korea’s $66 billion, according to U.S. Census bureau.

“Just because these economies have dodged tariffs for now, [it] doesn’t mean they can breathe easy,” Stefan Angrick, senior economist at Moody’s Analytics told CNBC, stressing that “Washington’s mood could shift and tariffs could still be imposed later.”

These countries, except for Vietnam, were spared in Trump’s opening tariff salvo thanks to their deep security ties with Washington and large investments in the U.S., Angrick said, but “they shouldn’t get too comfortable.”

Vietnam is “undoubtedly one of the most exposed economies” to being a target of Trump’s trade restrictions, due to its large surplus with the U.S. and sizeable Chinese investment in the country, Angrick said.

Vietnam’s trade surplus with the U.S. soared nearly 18% annually to a record high last year. The country’s simple average tariff rate on MFN partners stood at 9.4%, according to WTO data.

Beverages and tobacco imported into the country face up to 45.5% tariffs on average, while categories such as sugars and confectionery, fruits and vegetables, clothing and transport equipment are subjected to tariffs between 14% and 34%.

Trump, who in 2019 called Vietnam “almost the single worst abuser“ of trade practices, has not made any public remarks about the nation after his re-election in November.

Hanoi has made efforts in recent months to find compromises with Washington on trade. In November, the country vowed to buy more aircraft, liquified natural gas and other products from the U.S.

Vietnamese Prime Minister Pham Minh Chinh last week asked Cabinet members to prepare for the impact of a possible global trade war this year.

Vietnam was a major beneficiary of the trade barriers Trump imposed on Beijing in his first term, which spurred manufacturers to shift production out of China. Consequently, the Southeast Asian nation became one of the largest recipient of foreign direct investment from China.

The U.S. may double its tariffs on Vietnam to 8% if it enforces “full tariff reciprocity,” Michael Wan, senior currency analyst at MUFG Bank said in a note on Monday. That said, he expects a less extreme U.S. stance on the country, with “some sector-specific tariffs” as a more likely possibility.

India could be the most vulnerable to “reciprocal” tariffs as it imposes duties on U.S. imports that are significantly steeper than U.S. levies on shipments from India, according to estimates by several research firms.

U.S. tariffs on India could rise to above 15% from 3% currently, according to MUFG Bank’s Wen.

New Delhi in its union budget earlier this month reduced tariffs on a range of products including motorcycles, electronic goods, critical minerals and lithium ion batteries. Finance Secretary Tuhin Kanta Pandey said in an interview that “we are signaling that India is not a tariff king.”

Indian Prime Minister Narendra Modi is reportedly prepared to discuss further tariff cuts across a dozen sectors and buying more energy and defense equipment from the U.S. at his meeting with Trump later this week.

India’s surplus with the U.S., its third-largest trading partner, reached $45.7 billion last year. Notably, the country’s imported agricultural goods were subjected to hefty 39% duties.

During Trump’s first term, he had warm relations with Modi, but during his campaign for re-election, Trump had called India a “very big abuser” with tariffs.

In a phone call with Modi last month, Trump emphasized the importance of India buying more U.S.-made security equipment to reach a “fair bilateral trading relationship,” according to the White House statement.

Some market watchers floated the idea that the two sides may resume discussion on the long-awaited U.S.-India free trade accord. The Joe Biden administration had reportedly rebuffed India’s interest in exploring a free trade agreement, Indian local media reported, citing the country’s commerce and industry minister.

“Such a deal now would require substantial tariff reductions by New Delhi because it has much higher tariff rates than Washington; Trump believes in some degree of reciprocity,” according to Kenneth Juster, distinguished fellow at Council on Foreign Relations.

India could also offer to shift its oil imports from Russia toward the U.S. significantly to align with Trump’s plans of boosting oil and gas exports, said Arpit Chaturvedi, South Asia adviser at Teneo.

Japan appears to have secured a positive relationship with Trump and could be be shielded from higher tariffs “for now,” analysts said, as Prime Minister Shigeru Ishiba wrapped up a whirlwind visit to Washington over the weekend.

Tokyo maintains relatively low tariffs of around 3.7% on countries with MFN status, according to WTO data. That suggests “little scope for substantial increases in tariffs on Japanese goods,” Kyohei Morita, chief Japan economist at Nomura said in a note Monday.

During the summit last week, Japan agreed to import more natural gas from the U.S. and expressed interest in a project to deliver LNG through a pipeline from northern Alaska.

The two leaders also agreed on a compromise that instead of acquiring U.S. Steel, Japan’s Nippon Steel will “invest heavily” in the U.S. firm. Japan will provide technology for U.S. Steel to manufacturer better quality products in the U.S., Ishiba said.

Japan, which has been the largest foreign investor in the U.S. for five straight years, also pledged to expand that investment to $1 trillion, from $783.3 billion in 2023.

“While Japan may not avoid all the effects of future US tariff policies, Tokyo may avoid the targeted treatment seen with countries like Canada, Mexico, and China,” James Brady, vice president of Teneo said in a Saturday note.

“It may even hope for more lenient trade treatment than other major economies, as it appears to enjoy the status of one of Trump’s most favored nations,” Brady said.

China was slapped an additional 10% blanket tariff last week — just when Canada and Mexico got a reprieve.

Beijing’s retaliatory tariffs on select U.S. imports came into effect on Monday, following what appeared to have been a failed attempt to arrange a call between President Xi Jinping and Trump.

Beijing’s tit-for-tat measures — including 15% levy on U.S. coal, liquified natural gas, 10% duties on crude oil, farming equipment, cars and pickup trucks — are believed to be modest and restrained.

The tariff package is estimated to cover $13.9 billion worth of China’s imports from the U.S. in 2024, according to data compiled by Nomura, accounting for 8.5% of China’s total U.S. imports and just 0.5% of China’s total imports.

That is significantly lower than the $50 billion worth of U.S. goods targeted during Trump’s first term, said Tommy Xie, head of Asia macro research at OCBC Bank in a note on Monday.

The “calibrated approach” signaled that “China is opting for a more diversified response,” with non-tariff countermeasures such as export controls and regulatory probes into U.S. corporates, while also “leaving room for further negotiations,” Xie added.

After a sterling 2024 when Singapore’s biggest bank by assets booked record net profits, DBS CEO Piyush Gupta said that the bank needs to have “agility” and “nimbleness” to navigate a “choppy” 2025 amid unpredictable tariff and monetary policies from the U.S.

Speaking in an exclusive interview to CNBC’s JP Ong, Gupta said “we are actually quite conscious of the fact that the Trump administration could use economic tools as [a] weapon, and therefore tariffs and tax policies, etc., can change.”

Gupta’s comments come as Southeast Asia’s largest bank by assets posted a solid showing in its full-year results, with net profit reaching a record high.

For the financial year ended Dec. 31, the bank saw an 11% rise in full-year net profit to 11.4 billion Singapore dollars ($8.4 billion), while revenue booked a 10% increase to SG$22.3 billion.

Gupta described the performance as “great” and added that he was “quite pleased with the breadth of the performance.”

DBS attributed the increase to several factors, including a record high fee income and treasury customer sales reaching a new high. The bank’s net interest income, which is the interest a bank earns on loans minus that which it pays for deposits, rose 5% year on year to SG$15.04 billion.

DBS shares surged to a record intraday high of SG$46.5 following the results.

Furthermore, due to reduced expectations of interest rate cuts from the U.S. Federal Reserve, DBS expects net interest income in 2025 to be higher than 2024 levels.

“Interest income is always difficult to predict because the impact of rates is manifold,” Gupta said, adding that DBS had originally projected four rate cuts by the Fed in 2025, but has reduced that forecast to two cuts in its earnings report released Monday.

Following the stellar results, the bank proposed a final dividend of 60 Singapore cents per share for the fourth quarter, an increase of six cents from the previous payout.

This would mean that DBS’ total dividend for the 2024 financial year will stand at SG$2.22 per share, a year-on-year increase of 27%.

On top of the regular dividend, DBS announced a new “capital return” dividend of 15 Singapore cents per share for each quarter in 2025, as part of measures to manage excess capital.

“In the subsequent two years, it expects to pay out a similar amount of capital either through this or other mechanisms, barring unforeseen circumstances,” the bank added.

Gupta said the bank’s capital adequacy is currently at 17%, more than the 13% that DBS said that is its operating range.

Capital adequacy is the ratio of capital a bank has, reported as a percentage of a bank’s risk-weighted credit exposures.

“Therefore, we do have a lot of excess capital, and we have promised shareholders that over time we will be judicious and return the excess stock of capital that we have. So most shareholders have been waiting on our commitment to return that excess capital,” he added.

This results announcement will be Gupta’s last as DBS’ CEO. He will be handing over the reins of the bank to deputy CEO Tan Su Shan on March 28 at the bank’s annual general meeting.

When asked about his plans after 15 years at Southeast Asia’s largest bank, Gupta did not reveal any details, but told CNBC, “I’m going to take a deep breath, spend three or four months, give myself some time to chill a bit, and then we take it from there.”

Global tariff threats from U.S. President Donald Trump aside, New Zealand is optimistic about its trade relationship with the United States.

Speaking to CNBC’s “Squawk Box Asia,” New Zealand Finance Minister Nicola Willis said that “New Zealand is distinguished in that we have a very balanced and complementary trade relationship with the United States,” adding that it’s “hopeful of pursuing ongoing positive trade relationships” with it.

She noted that the U.S. imports meat and wine from the country, and New Zealand imports “significant goods and services from the United States.”

Trump on Sunday said he will announce global tariffs of 25% on steel and aluminum imports into the U.S, adding on to earlier threats of tariffs on Canada and Mexico.

According to New Zealand’s Ministry of Foreign Affairs and Trade, the country exported 14.6 billion New Zealand dollars ($8.26 billion) in goods and services to the United States — overtaking Australia to become New Zealand’s second-largest export market — and imported NZ$11.4 billion for the 12 months ending March 2024.

That represented a trade balance of NZ$3.5 billion and a total trade value of NZ$25.8 billion, not adjusted for inflation.

Willis described the relationship between the two nations as “one that works for both parties,” pointing out that New Zealand is also part of the “Five Eyes” intelligence alliance, which she said is “a foundation of a very strong strategic relationship.”

The “Five Eyes” is an intelligence alliance comprising Canada, the United States, the U.K., Australia and New Zealand.

When asked if that means the country will be able to avoid tariffs from Trump, Willis said that “decisions on tariffs are matters for the U.S. administration,” and New Zealand “would deal” with the situation if it arises.

She is of the view that the New Zealand dollar will provide some buffers if tariffs are implemented, saying that a lower New Zealand dollar will assist the country’s exporters by making exports more competitive.

The kiwi recently weakened to its lowest point in over two years against the U.S. dollar, trading at 0.5515 to the greenback on Feb. 3.

Willis also acknowledged the country’s “significant current account deficit,” but added that the flexibility of the exchange rate will “allow balancing to occur.”

The Reserve Bank of India on Friday cut key interest rates for the first time in nearly five years, as cooling inflation offers the central bank room to stimulate the country’s faltering economy.

The Monetary Policy Committee decided to trim the repo rate by 25 basis points to 6.25%, RBI Governor Sanjay Malhotra said in a livestreamed address.

The rate reduction was widely expected and marked RBI’s first cut since May 2020 when the country battled the pandemic-inflicted downturn.

The decision confirmed that the central bank’s priorities have “tilted from containing inflation to providing more support for the economy,” Shilan Shah, deputy chief emerging markets economist at Capital Economics said in a note.

“With the economy likely to remain in a soft patch for a few more quarters yet, further easing is on the cards,” Shah said, forecasting 75 basis points of cuts in this easing cycle.

The central bank forecast real GDP growth for next fiscal year at 6.7%, and inflation rate at 4.2%. For the fiscal year ending March this year, the RBI downgraded real GDP to 6.4% — its worst in four years — from 6.6% forecast in December, while inflation rate was retained at 4.8%.

Indian stocks fell with the benchmark Nifty 50 index shedding as much as 0.5%. The yield on 10-year bonds rose by more than 4 basis points to 6.7%.

In a unanimous decision, the six-member panel voted to keep policy stance of “neutral.” That came as a surprise to some market watchers who had predicted a shift to “accommodative” before the announcement.

Though growth is expected to recover from the low of the second quarter ended September, it is still “much below that of last year,” Malhotra said.

“These growth-inflation dynamics open up policy space for the MPC to support growth, while remaining focused on aligning inflation with the target,” he added.

The benchmark repo rate had remained steady at 6.5% for the past two years, with inflation staying above the central bank’s medium-term target of 4%.

Following a peak in October, India’s consumer price inflation has eased, dropping within the central bank’s tolerance ceiling of 6%, coming in at 5.22% in December and 5.48% in November.

Asia’s third-largest economy has grappled with a sharp slowdown since last year, with a growth rate of 5.4% in the quarter ended September, undershooting expectations by a large margin and marking its slowest expansion in nearly two years.

With the rupee hitting record lows against the greenback, any cuts to the bank’s policy rate could spark a further rise in domestic inflation, putting further pressure on the currency and likely triggering capital outflows.

Following the Friday address, the Indian rupee strengthened modestly to 87.47 against the greenback.

The RBI has reportedly resorted to interventions in the foreign exchange market to help cushion any sudden outflows of foreign capital and avoid a steep decline in the currency.