Markets shaken as Trump's trade war intensifies

At the close of Monday’s trading session, the Sensex was down 319 points or 0.41% at 77,187, and the Nifty was down 121 points or 0.52% at 23,361.
On Saturday, Trump signed an order imposing tariffs: a 10% duty on all imports from China, and a 25% duty on those from Mexico and Canada.
On Saturday, Trump signed an order imposing tariffs: a 10% duty on all imports from China, and a 25% duty on those from Mexico and Canada.
Updated on
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Concerns over U.S. President Donald Trump’s tariff announcements overshadowed the optimism surrounding the Union Budget on Monday, causing the benchmark indices—BSE Sensex and NSE Nifty—to slide nearly 1% intraday before closing with losses of up to 0.52%. Additionally, the rupee weakened, breaching the ₹87 mark against the dollar for the first time, signaling that foreign institutional investors (FIIs) are unlikely to reverse their selling trend.

At the close of Monday’s trading session, the Sensex was down 319 points or 0.41% at 77,187, and the Nifty was down 121 points or 0.52% at 23,361. In the broader market, The BSE Midcap index fell 1% and the smallcap index fell 1.7%. FII net sales from the domestic market stood at nearly Rs 4,000 crore on Monday. 

“Slump in global equity markets weighed negatively on Indian benchmarks after Trump announced tariffs on China, Mexico and Canada which fuelled pessimism amongst the investors. The strong bearish undercurrent triggered massive selling in mid and small-cap stocks and the consumption-related FMCG and automobile stocks, as any let up in tariff war could trigger panic selling,” said Prashanth Tapse, Senior VP (Research), Mehta Equities. 

On Saturday, Trump signed an order imposing tariffs: a 10% duty on all imports from China, and a 25% duty on those from Mexico and Canada. The move, effective from Tuesday, follows escalating tensions, with neighbouring nations - Canada and Mexico - retaliating, and China planning countermeasures. In 2023, US trade with North America amounted to $1.8 trillion, while trade with China totalled $643 billion. 

While Trump has not imposed any tariffs on Indian imports so far, his actions against China, Mexico, and Canada are impacting the global economy and markets, including India. A full-blown trade war could disrupt existing supply chains and slow economic growth, adding to market uncertainty.

Almost all the Asian equity market benchmarks closed in the red on Monday with Japan, Korea and Taiwan falling between 2.5-3.5%. Key European benchmarks also crashed by about 1.50% each as Trump said that he would be implementing tariffs on goods from the European Union “pretty soon”. 

The US market also opened with deep cuts on Monday with all the key indices- Dow Jones, S&P 500 and Nasdaq falling more than 1% each. 

Vinod Nair, Head of Research, Geojit Financial Services, said that the global market got unsettled amid the onset of the 'Trade War,' as tariff conflicts between the US and other nations are unlikely to yield any economic benefits. “Instead, it may cause challenges to the global economy, heightening global financial risks. International trade, which had flourished under the framework of globalisation, now faces threats from the new protectionist policies. Front and contour tariffs are expected to make the world less efficient and elevate global inflation & interest rates,” added Nair. 

Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, however, feels that Trump's latest tariff announcements on Canada, Mexico, and China are not too off from what was previously discussed. 

“It is likely less of a shock than it was in 2018. While tariffs may boost short-term fiscal positions, they might risk higher inflation, contrasting with Trump's desire for lower interest rates. Investors should recall that 2018's volatility created buying opportunities. As history often rhymes, the rest of the year may present similar scenarios, warranting vigilance for potential investment openings amid economic and political developments,” added Mandal. 

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