Stock indices Sensex and Nifty fell sharply in Tuesday’s trade, as the tit-for-tat tariff war begins, with Asian markets nervously assessing its impact on exports, global inflation and economic growth.
Mirroring the selloff on Wall Street overnight, most Asian markets slumped up to 2 per cent today as tariff threats are turning into action, dragging domestic benchmarks at start. Sensex plunged 371 points, or 0.51 per cent, to 72,713. Nifty fell 149.90 points, or 0.68 per cent, to 21,969.40. India VIX, which suggests the market volatility over the next 30 days, climbed 1.32 per cent to 13.95.
V K Vijayakumar of Geojit Financial Services said the uncertainty unleashed by Trump is aggravating in global trade. The retaliation to these Trump tariffs is yet to be known. Certainly there will be responses, he noted.
“If Trump tariff policy continues like this and soon starts impacting other countries it will be bad for global trade and the global economy. India will not be spared. There is one factor that will tame Trump and that is the market reaction,” Vijayakumar said.
Vijayakumar said the tariffs will soon raise inflation in the US and turn the US Fed hawkish. The US stock market, which is now priced to perfection, can suffer a severe correction, even a crash, he warned.
“This outcome, which Trump abhors, can tame him and bring about some sanity and balance in his policies. We don’t know when this will happen. In the near-term, there are no chances of a rebound in the Indian market even though valuations are fair. Investors should remain cautious and wait to see how the scenario unfolds,” he said.
The US President Donald Trump said 25 per cent tariffs on Mexican and Canadian imports will start Tuesday, with no room for delay. In a retaliation, Canada also announced 25 per cent tariff on $107 billion worth US goods, thus kicking off the tariff war.
“Additionally, the US government’s decision to proceed with new tariffs on China from March 4 has sparked concerns about its potential impact on inflation, adding to volatility across global markets. Investors remain cautious as they assess the long-term implications of these trade restrictions,” said Ashutosh Mishra, Head – Institutional Equity Research at Ashika Stock Broking.
Nomura said the 10 per cent tariff on China brings cumulative tariffs on China to 20 per cent within less than one and a half months of the start of Trump’s new presidency, lifting average US tariff rates on China to approximately 33 per cent, based on its estimates.
“We believe Trump’s seemingly soft stance on China over recent weeks was only tactical, with markets potentially underestimating his resolve to curb China and his intent on pursuing bolder measures in his second term. While markets presently overlook these risks, they may take centre stage in the coming months,” it warned.
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