An uncertain mood prevails across global markets even after US President Donald Trump paused reciprocal tariffs for 90 days. American, Asian and European markets recouped losses on Thursday following the delay in tariff rollout. But they were razed again the next day. Indian markets were an exception, with Sensex crossing 75,400 and Nifty going past 22,900 on Friday before closing a bit lower. It was a catch-up rally, as domestic trading was closed on Thursday. But the positive momentum was led by strong global cues and renewed optimism surrounding a potential Indo-US trade deal. In contrast, Wall Street saw a sharp sell-off, with Nasdaq closing 4.6 percent lower on Thursday, just a day after it had regained roughly $4 trillion of losses incurred in the previous four trading sessions. Clearly, the global market rout is not done yet, as Trump raised duties on Chinese imports as high as 145 percent, prompting Beijing to retaliate with 125 percent tariffs.
A full-blown global trade war may have been put on hold for now. But the intensifying confrontation between the world’s two largest economies, the US and China, will likely have serious ramifications, including a recession in the US and dismantling of the world trade order. What’s also becoming clearer is that the heightened uncertainty and volatility will likely persist for some more time. Even as countries gingerly explore one-on-one deals with the US to stave off the tariff trauma, the political and economic consequences of a US-China trade war will stretch beyond their borders. Trump has expressed willingness to talk turkey with China, but Beijing is strengthening its arsenal of regional economic ties and appears determined to change the global trade landscape. It’s reassessing its strategies on full steam, including the Regional Comprehensive Economic Partnership that includes 15 Asia-Pacific countries, and is keen on building supply chains and promoting investment flows within the region.
India, too, must chart its own course. China has called on India to stand together against the US tariffs, though the latter is treading with extreme caution given that Chinese goods have been flooding Indian markets for decades, weakening our manufacturing muscle. The government is also keen on closing a trade deal with the US, but it needs to put in extra efforts to forge as many regional partnerships as possible.