Trump's tariff tantrum: Asian markets rattled, India fares better

Gift Nifty futures took a hit earlier this morning, dropping nearly 2%, while Indian benchmark indices Nifty 50 and S&P BSE Sensex fell 1% in pre-open trade. However, Nifty 50 and Sensex later trimmed some losses, ending the day’s trade at 0.42% and 0.35% lower, respectively.

In comparison, Japan’s Nikkei 225 fell 2.77%, Hong Kong’s Hang Seng ended 1.57% lower, and South Korea’s Kospi was down 0.76%.

Madhavi Arora, lead economist at Emkay Global Financial Services, believes Asia peers had taken a harder hit from tariffs than India, partly because India is less export-dependent compared to emerging markets in Asia. However, she does not expect India to completely escape the cyclical downturn affecting the region.

In the near to medium term, the US dollar could make a comeback as recession fears mount, Arora says. At the same time, she warned of looming dirty foreign exchange wars as countries gear up to navigate the ongoing trade conflict. In the short term, she expects a broad rise in risk premium across emerging market assets.

Trump fired up global trade tensions by announcing a baseline 10% tariff on all imports starting 5 April, with additional reciprocal tariffs on specific countries from 9 April. India will be hit with a 26% tariff, while China’s rate soars to 54%, up from the previous 20%. It’s a bold move set to rattle international markets.

According to Arora, “Sector-specific tariffs will also be imposed, but those sectors will not be part of the country-level tariffs". For example, Indian autos will face a 25% tariff, imposed on all autos globally, and not the country-level tariff of 26% (or 26% +25%), she explained.

Kranthi Bathini, director of equity strategy at WealthMills Securities, sees Trump’s aggressive tariff move as a stark warning of just how intense this trade war might get. By leaving no loopholes for any nation, Trump has made it clear he means business. Bathini expects this to unleash a wave of volatility across global markets in the near to medium term—while the US itself might just be flirting with a recession.

Also Read: In charts: How Trump’s reciprocal tariff plans could impact India

For context, the US keeps it pretty light on tariffs compared to many other countries. For example, it imposes a 2.5% tariff on passenger vehicle imports with internal combustion engines, while the European Union slaps 20%, India a hefty 70%, and China 15%. When it comes to network switches and routers, the US charges zero, but India isn’t so lenient with a 10% tariff.

Similarly, ethanol faces a mere 2.5% tariff in the US, but Brazil and Indonesia hit it with 18% and 30%, respectively. As for rice in the husk, the US charges just 2.7%, while India goes up to 80%, Malaysia 40%, and Turkey averages around 31%. Even apples, which enter the US duty-free, get taxed heavily in Turkey (60.3%) and India (50%).

“We will have to consider the impact of the tariffs across the world, a negative for global GDP, negative for India and Indian markets," said Sanjeev Prasad, Co-head of Institutional Equities, Kotak Institutional Equities.

This would lead to earnings downgrades, impacting sectors such as chemicals, engineering goods and even IT because even though it is a tax on goods imports, it will lead to slowdown in demand and eventually in corporate spends on IT, he said. Although pharma is exempt for now, he doubts it will stay that way for long. While some domestically focused businesses might feel less of an impact, the overall outlook remains negative.

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Anirudh Garg, partner and fund manager at Invasset PMS, points out that key export-oriented sectors like electronics, textiles, gems & jewellery, auto parts, and processed foods are feeling the heat from steep US duties. However, there’s a silver lining—pharma, a cornerstone of India’s exports, has been spared for now. That’s a big relief, given that Indian pharma meets over 40% of the US’ generic drug demand. Along with IT services and select chemicals, these sectors remain outside the tariff storm—for the time being.

“For India, this split offers an opportunity to double down on sectors like pharma that retain global competitiveness despite geopolitical churn," Garg said.

Even so, there is still a lot to unpack in the coming days as more details emerge about the specific impact on individual products from different companies. Plus, companies will soon start sharing how they plan to tackle the fallout.

"Even though India remains one of the more resilient markets from a long-term perspective, global uncertainties could lead to continued volatility in the short to medium term," said Sankaran Naren, CIO, ICICI Prudential AMC.

He said that the US economy—a major engine of global growth—could face a slowdown due to tariffs and broader economic worries, creating a volatile environment for both global and Indian markets. However, he believed the Indian economy is well-positioned to weather the storm.

“Not a big change for India, prima facie, as it doesn't hurt our relative advantage in trade compared to countries such as Bangladesh, Vietnam etc, where higher tariffs have been slapped and where we can now compete more effectively in traditional sectors such as garments and gems and jewellery. It's probable that markets have priced this in and not reacted too negatively," said Devina Mehra, founder and chairperson, First Global.