The indictment of Indian tycoon Gautam Adani, Asia’s second richest man, on bribery charges in a U.S. federal court on Wednesday shocked India.

The charges put his empire under renewed scrutiny less than two years after allegations of financial irregularities by short-seller Hindenburg Research wiped $130bn off the group’s public market value.

Who is Gautam Adani?

Gautam Adani is the founder and chairman of the Adani Group, which has interests in renewable energy, ports, airports, construction materials, food and media. He is often referred to as ‘Number 1’ and ‘Big Man’ by other defendants in the case.

Adani, 62, from a middle-income textile family in the western Indian state of Gujarat, set up his group in 1988 to trade in commodities. Over time, Adani grew his business through an aggressive leverage strategy, moving into many sectors critical to the country’s infrastructure. The group was worth around $170 billion before the indictment led to the sale of its listed assets.

Adani’s rise mirrors that of Indian Prime Minister Narendra Modi, himself from Gujarat. Modi’s political opponents have often claimed that Modi has favored the billionaire, as Adani has benefited greatly from the tenders it has won for public projects thanks to the Modi government’s infrastructure development drive. Both Adani and the government have denied any special treatment.

What are the charges?

U.S. prosecutors allege that Gautam Adani, his nephew Sagar Adani and six other defendants conspired to pay $265 million in bribes to Indian government officials to secure ‘lucrative solar power supply contracts’. The defendants also allegedly ‘concealed’ the bribes from U.S.-based investors in order to ‘obtain billions of dollars in financing’.

The bribery scheme, dubbed the ‘Corrupt Solar Power Project’ in the indictment, centered on numerous solar power contracts awarded by the state-owned Solar Energy Corporation of India to Adani’s renewable energy unit and another Indian company, Azure Power.

Adani and others have also been charged by the U.S. Securities and Exchange Commission with making ‘materially false or misleading’ statements about anti-bribery practices when raising $750 million from investors in September 2021, including $175 million from U.S. investors.

How will the indictment affect the Group’s business?

Following the indictment, 11 of the conglomerate’s twelve companies collectively lost around $27 billion in value on Thursday, a repeat of the collapse in January 2023, when Hindenburg Research accused the group of stock manipulation and improper use of offshore tax havens, among other allegations.

Shares in holding company Adani Enterprises fell more than 22%, while shares in Adani Green Energy, the focus of the investigation, fell nearly 19%. Only New Delhi Television (NDTV), the news media arm of the conglomerate, closed marginally higher. Shares in most Adani companies continued to fall in early trading on Friday.

“The indictment could affect Adani’s upcoming fundraising plans. Adani Green Energy has reportedly cancelled the sale of $600 million in U.S. dollar-denominated bonds. The biggest short-term impact of this development is that the Adani Group may find it difficult to raise new funds, especially from leading financial institutions, until its name is cleared,” said Abhishek Basumallick, founder of investment advisory firm Intelsense.

Late on Thursday, Kenyan President William Ruto said he was cancelling Adani’s purchase of a controlling stake in the country’s main airport and a $736 million public-private partnership with the company to build power transmission lines.

How have the Adani Group and the Indian government responded?

In a statement on Thursday, the Adani Group rejected the charges in the indictment, calling them ‘baseless’.

As the U.S. Department of Justice has stated, the charges in the indictment are allegations and the defendants are presumed innocent until proven guilty,’ the group said in a statement: ‘All available legal remedies will be pursued.

There has been no official reaction from the Indian government.

Jaideep Mazumdar, Joint Secretary (East) in the Ministry of External Affairs, declined to comment when asked about the Adani issue during a press conference on Modi’s visit to Guyana in South America. “This is a press conference organised for the Indian Prime Minister’s visit to Guyana and the India-CARICOM (Caribbean Community) Summit, and I am not in a position to respond to questions beyond this mandate,” he said in Guyana’s capital, Georgetown.

Modi’s political rivals have launched a series of attacks on the billionaire.

Rahul Gandhi, senior leader of the Indian National Congress, said at a press conference on Thursday: “Adani has in a way taken over India; the country is in the grip of Adani. So, India’s airports, ports, defence industry… it is a partnership. Modi is on one side of the partnership and Adani is on the other,” he said.

Gandhi is also the leader of the opposition in the lower house of parliament and is in a powerful position to have a say in the appointment of a director of the Central Bureau of Investigation, the country’s anti-crime agency. Gandhi said his party would raise Adani’s charges in the winter session of parliament, which begins on Monday.

Is extradition expected to come up?

There is an ongoing investigation into Adani, launched last year by India’s securities regulator in the wake of the Hindenburg Research allegations.

Lawyers in India and the U.S. have said that U.S. prosecutors may seek the extradition of Adani and other defendants in the latest charges. The two countries have had an extradition treaty in place since 1997.

Prashant Mendiratta, a lawyer at the Delhi High Court, said the Indian Ministry of External Affairs would be the primary decision-maker if the U.S. government made an extradition request.

“If the Indian government refuses extradition, the prosecution can approach the Indian judiciary with a petition against the decision … there is a high probability that this will turn into a two-front legal battle,” Mendiratta added.

The Indo-U.S. extradition treaty also stipulates that an offence must be punishable by imprisonment of one year or more before extradition can be granted. Under India’s Bharatiya Nagarik Suraksha Sanhita (BNSS) Act, bribery is only punishable by up to one year in prison.

The more stringent Prevention of Corruption Act (PoCA) can also be applied in this case.

However, for the PoCA to apply, it must be proven that a bribe was solicited and accepted by the government official.

“Obviously we are aware of these allegations,” White House spokeswoman Karine Jean-Pierre said at a press briefing on Thursday when asked if the U.S. was concerned that the charges against Adani could damage bilateral relations: “What I would say is that we believe that the relationship between the United States and India rests on an extremely strong foundation based on the relationship between our peoples and cooperation on the full range of global issues.”

Asian countries are responding to U.S. President-elect Donald Trump’s protectionist rhetoric by placing greater emphasis on regional and bilateral trade agreements aimed at promoting transnational economic cooperation without U.S. involvement, analysts say.

After being sworn in for a second term on January 20, 2024, Trump made tariffs a cornerstone of his campaign, pledging to impose duties of up to 20% on U.S. imports across the board, as well as a 60% tariff on Chinese goods.

At the recent Asia-Pacific Economic Cooperation (APEC) forum in Peru, leaders from many of the 21 member economies called for greater regional economic integration as geopolitical tensions rise and supply chains become increasingly fragile.

China signed a stronger trade agreement with Peru.

Indonesia finalized a trade deal with Canada.

Singapore’s Prime Minister, Lawrence Wong, emphasized the importance of reviving the Asia-Pacific Free Trade Area, an agreement still under negotiation among APEC economies.

“APEC is more important now than it was before,” Wong said, highlighting the urgency of collaboration.

Multilateral regional economic partnerships

Trade deals excluding Washington, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are expected to become more vital for Asian countries in the coming years.

“This will help us manage some of the chaos and damage from the collapsing global system,” said Deborah Elms, head of trade policy at the Hinrich Foundation, an Asia-based group promoting sustainable trade, in an interview with Nikkei Asia.

The RCEP, a trade agreement involving 15 Asia-Pacific countries—including China, Japan, South Korea, and ASEAN members—was signed in November 2020 after eight years of negotiation. Together, these countries account for roughly 30% of global GDP.

In 2017, Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP), leaving Japan to lead the revised agreement. Renamed the CPTPP, the 11-member group, including Canada, Australia, New Zealand, Singapore, and Vietnam, is entering its sixth year. Trade between members rose 5.5% between 2018 and 2021. The United Kingdom joined in December, while China has expressed interest in becoming a member.

Given Trump’s anti-globalization stance, analysts suggest that Japan should expand the CPTPP by adding members and deepening cooperation with the European Union.

A Chinese delegate at APEC remarked, “At the end of the day, we have many trading partners.”

However, China’s own economic policies could pose challenges to regional trade cooperation.

Priyanka Kishore, founder of consultancy Asia Decoded, emphasized that China must boost domestic consumption and increase imports to strengthen regional trade.

“China has a crucial role to play in supporting the region’s external demand,” Kishore told Nikkei Asia, adding, “It needs to do more if it wants to be the champion of intra-regional trade.”

Finding new trading partners could take years

Higher U.S. tariffs could hit Asian economies hard, particularly those with trade-to-GDP ratios exceeding 100%, such as Singapore, Hong Kong, and Vietnam. Currently, only Singapore and South Korea have free trade agreements with the U.S.

Tariffs, paid by importers in the U.S. and collected by U.S. Customs and Border Protection, raise costs that are often passed on to consumers. However, they also hurt foreign exporters by making their goods less competitive.

According to research by Yang Zhou, an economist at Fudan University, the U.S.-China trade war cost China $35 billion, and the U.S. $15 billion in 2018 alone.

A study by Global Trade Alert, an independent organization monitoring world trade policies, explored how Asian countries might cope with losing access to the U.S. market. It concluded that it would take these countries an average of five years to establish new trade partnerships.

For countries like Thailand, the timeline could extend to 24 years, as they shift trade to China, the EU, Vietnam, and Japan. For South Korea, it might take until 2038 to fully replace the U.S. as a trading partner.

Southeast Asia is worried about Donald Trump’s threat of universal tariffs and a new trade war with China. Five of the region’s six largest economies run a trade surplus with the United States.

But experts say the situation may not be so bad. The region, which tries to remain geopolitically neutral, saw an increase in gross trade with both China and the U.S. between 2017 and 2020 during Trump’s first presidency. Vietnam, Indonesia, Malaysia, and Thailand have benefited as companies from China, Japan, South Korea, Taiwan, and the U.S. have expanded their production bases in Southeast Asia to avoid U.S. tariffs.

Experts say exports and economic growth will take a hit in the short term, but the region could benefit from trade diversion and substitution.

What is Trump’s tariff threat?

The goal of Trump’s trade policy is to bring manufacturing jobs back to the U.S. and decouple supply chains from China. Trump and his advisers claim that China’s trade advantage is due to “currency manipulation, intellectual property theft and forced technology transfer”.

During his first term, Trump used executive powers to impose tariffs of up to 25% on $250bn of electronics, machinery and consumer goods imported from China. Beijing retaliated with similar measures on U.S. agricultural, automotive and technology exports.

Now Trump has proposed a 60 per cent tariff on all Chinese goods entering the U.S. and tariffs of up to 20 per cent on imports from everywhere else.

How bad could it be for Southeast Asia?

According to Oxford Economics, about 40 per cent of Cambodia’s exports go to the U.S., making it the largest exporter in Asean as a percentage of total exports, followed by Vietnam with 27.4 per cent and Thailand with 17 per cent. Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said the Thai economy could take a 160.5 billion baht ($4.6 billion) hit if Trump fulfils his promises.

Vietnam has the world’s fourth-largest trade surplus with the United States. This imbalance has been growing rapidly as Chinese, Taiwanese and South Korean companies have used Vietnam to avoid Trump-era tariffs. Vietnam’s fortunes could change just as quickly, especially if the U.S. continues to classify Vietnam as a ‘non-market economy’, which requires higher tariffs.

Uncertainty over Trump’s tariffs could cause companies to pause or halt investment plans in Southeast Asia. U.S. companies accounted for about half of Singapore’s $9.5 billion in fixed-asset investment last year, according to the city-state’s Economic Development Board. In his congratulatory letter to Trump, Prime Minister Lawrence Wong was quick to remind him that the United States enjoys a “consistent trade surplus” with Singapore.

Any blow to the Chinese economy will have repercussions for Asean countries that depend on Chinese consumption, export demand and tourism. A reduced appetite for Chinese goods will also affect Southeast Asian suppliers of inputs to Chinese producers. Indonesia, Southeast Asia’s largest economy, will suffer the most because it exports 24.2 per cent of its goods to China, mainly commodities.

Unable to send their goods to the U.S., Chinese exporters may turn to Southeast Asia, where governments have faced complaints from local producers hurt by dumping in metals, textiles, and consumer goods.

What is Southeast Asia’s advantage?

Southeast Asia’s current manufacturing boom started because of the trade war. Over time, analysts expect trade substitution and diversion to outweigh the hit to growth.

“We think a stronger crackdown on China could lead to more supply chain diversion as Chinese companies trade and invest more in Asia,” said Jayden Vantarakis, head of ASEAN research at Macquarie Capital.

“Electric vehicle factories, which some Southeast Asian governments are aggressively pursuing, could provide an economic buffer. Demand for EVs is also growing outside the U.S., so I think there could be a net benefit for Indonesia. Smaller countries that are trying to be carbon neutral, especially as petrol prices get more expensive, will try to take over the supply and buy more electric cars,” said Sumit Agarwal, a professor at the National University of Singapore’s School of Business.

Trump’s promised tariffs could embolden Asean governments to impose anti-dumping duties on Chinese goods, as Thailand did on rolled steel this year. Stricter U.S. rules of origin could also give governments an opportunity to ensure that more high-value parts are produced and assembled locally.

How will Southeast Asian currencies and markets be affected?

Trump’s tariffs could reduce pressure on Southeast Asian central banks to ease monetary policy further.

“Essentially, Trump’s victory is inflationary for the world because of his planned tariffs, so the global monetary normalization or easing cycle will probably not be as sharp as previously thought, including in the Philippines,” said Miguel Chanco, chief emerging Asia economist at UK-based Pantheon Macroeconomics.

Speaking to Nikkei Asia, Chanco said Southeast Asian currencies will not strengthen as much as previously expected, partly because markets are re-pricing the pace of easing by the U.S. Federal Reserve and thus the dollar will continue to strengthen.

Among Southeast Asia’s six major economies, the Thai baht and Malaysian ringgit have been the worst-performing currencies since Trump’s victory, losing 3.2 per cent and 2.9 per cent respectively against the U.S. dollar through Wednesday.

Thai brokerage InnovestX recommended stocks that would benefit from a strong dollar and weak baht. These include companies with significant export earnings, such as CP Foods and Delta Electronics, or tourism-related companies such as Airports of Thailand, property developers and hoteliers.

Governments are already taking steps to reduce their over-dependence on the U.S. or China by deepening ties with other countries and regions and emphasizing their neutrality.

Southeast Asian economies in particular are also expected to focus on building resilience by strengthening intra-ASEAN trade.