By VK Sharma
The world was worried that in the first week of April US would impose sanctions on its trading partners. On Wednesday, President Trump did exactly that, announcing across the board tariff hikes with all its trading partners, including India. The market’s worst nightmare has now come true.
While the US has gone ahead and walked its talk, countries are now beginning to react. China says it will impose a reciprocal 34% tariff on all imports from the US from April 10 and control the exports of rare earth. Besides, China also added 11 US bodies to the “unreliable entity” list, which allows Beijing to take punitive actions against foreign entities. The Chinese steps are a promised tit for tat move.
Canada readies retaliation
The EU seems to be divided on how best to respond to Trump’s tariffs. Countries cautious about retaliating and thereby raising the stakes in the standoff with the US include Ireland, Italy, Poland and the Scandinavian nations. For the week, the Dow fell 7.87%, the S&P 500 slumped 9.08%, the Nasdaq tanked 10.02%, The move brought the markets to their lowest level in 11 months.
The US markets in Thursday & Friday have wiped out $5.4 trillion of their market cap. In comparison, our markets have been less impacted. The Nifty is down only 2.61% for the week at 22,904. The NiftySmallCap index also shed 2.61% for the week. The Bank Nifty only shed 0.12% for the week. Though the fall in the Nifty on Friday was just 1,49%, it broke the important support of 23,100.
Economists believe the US economy will go into a recession this year on account of the tariffs announced last week. JP Morgan estimates that there is a 60% chance of the global economy entering a recession by year-end, up from 40% previously. Coming to our markets, the Nifty had a strong support from the trendline no 56, at 22,700 but is unlikely to hold. The last at 21,964, the low seen on March 4, 2025, the lowest seen this CY.
India is much better placed in this tariff war than most countries as we are essentially an economy with large domestic consumption. Besides, we have taken a larger beating before. While our markets too will fall in line with the global ones, we should eventually do better. Allow things to settle as Chinese markets open with a thud. The outcome of the upcoming RBI MPC meet should provide the necessary stimulus or trigger later in the week.
(The author is a veteran with over three decades’ experience in the capital market)