The U.S. just slapped broad tariffs on imports from almost everyone – 10% baseline on all countries – plus much higher rates on certain targets. China gets hit with ~34%, the EU ~20%, and India around 26-27%. It’s being called “reciprocal tariffs” or even “Liberation Day” tariffs by the White House.
I’d love to hear what you all think about: the extent of these tariffs, the impact on the U.S. market, what investors should do, and the ripple effects on India’s economy and stocks.
Oh, I’ve been following this non-stop. This is the wildest trade move since, well, the last trade war — but this one’s bigger. Markets are definitely in risk-off mode. Yesterday when the news hit, U.S. stock futures plummeted – S&P down about 3%, Nasdaq nearly 4% in after-hours.
I also traded a couple of stocks thanks to after market hours trading feature of Vested.
the Dow sank something like 4% at one point, which is its worst day in a long time. Tech stocks got especially hammered (Apple was down ~3% just in after-hours trading and likely more during the day) because so many tech companies rely on Chinese supply chains or sales. Retail stocks tanked too, since a ton of consumer goods are imported and will now cost more.
It’s really giving me flashbacks to 2018’s trade war jitters, except this is on steroids. Back then it was mostly US vs China; now it’s US vs everyone (China, EU, India, you name it – they even threw tariffs on small countries and, hilariously, even some uninhabited territories… talk about overkill). Investors are flocking to safe havens: gold shot up to a new high, and U.S. Treasury yields fell as people bought bonds. Basically a classic “sell stocks, seek safety” reaction.
In the short term, I expect continued market choppiness. We’ve got recession fears mounting now because if you tax imports that heavily, consumer prices in the U.S. could rise, which might force the Fed to take extreme measures.
At the same time, higher costs and likely retaliation could hurt corporate earnings. It’s like we just added a trade shock on top of an already delicate economic situation (inflation was finally cooling a bit, and now this). So yeah, not a great combo.
Sector-wise, apart from tech and retail, I’d watch industrials and exporters. Boeing and big manufacturers could suffer if other countries hit back by cutting orders (China could cancel some Boeing jets, for example).
On the flip side, some U.S. domestic-focused industries might gain a little in theory – e.g. companies making stuff that used to face a lot of import competition. Maybe American steelmakers or furniture manufacturers could see a bump since imports of those goods get pricier.
Many U.S. manufacturers also rely on imported components. A great example: Stellantis (the automaker) already announced temporary layoffs in some North American plants because supply chains are in disarray. So the pain is hitting everywhere, even the “winners” are getting hurt by something (either higher input costs or lost foreign markets).
As an investor, I’m pretty cautious right now. I haven’t rushed to “buy the dip” yet because I suspect this isn’t just a one-day story. If this trade war escalates with rounds of retaliation, stocks could have more downside. I’m holding a bit more cash and maybe even adding to gold as a hedge. For equities, I’m evaluating which companies have heavy China/Europe exposure – those might stay under pressure.
Also, interestingly, U.S. small-cap stocks (which tend to be more domestic) might be relatively safer than the multinational-heavy S&P 500 names. I might rotate a bit into those or into sectors like utilities or consumer staples (things people buy regardless, trade war or not). But yeah, overall I’m in watch-and-wait mode. Let’s see if cooler heads prevail or if this spirals further.
It’s crazy indeed. From an Indian investor’s perspective, it’s a mixed bag of concern and maybe opportunity. We woke up to this tariff shock, and our markets reacted – but not as badly as one might think, actually. The Nifty and Sensex fell only around 0.3-0.4% by the end of the day, which is pretty mild considering the carnage elsewhere.
Compare that to, say, Vietnam’s market which plunged almost 7% (no surprise, since Vietnam got slapped with a whopping 46% tariff!). I think one reason we didn’t fall as much is that India’s tariff, while high at ~27%, is still lower than what many other Asian peers got. There’s a sense that India might come out relatively better in this ugly situation, possibly picking up some trade or investment that’s diverted from harder-hit countries like China or Vietnam.
But don’t get me wrong – a 27% tariff is still a big deal for us. Certain Indian sectors are vulnerable and the market is already repricing some of them. We saw a clear sector shift:
IT Services (Tech): Took a beating. Our Nifty IT index was down over 4% – its sharpest drop in two years. That’s because our big IT firms (Infosys, TCS, etc.) rely heavily on the U.S. for business. It’s not that their services are directly tariffed (tariffs are on goods, not services), but if the U.S. economy slows or enters recession due to the trade war, those companies could see their clients cut back on spending. So investors are pre-emptively selling IT stocks fearing a U.S. slowdown will hurt tech outsourcing demand. It’s a bit of a proxy for U.S. growth sentiment.
Pharmaceuticals: Interestingly, pharma stocks jumped yesterday. The U.S. ended up exempting pharmaceutical products from these tariffs (makes sense, slapping a huge duty on medicine would raise U.S. healthcare costs and be pretty unpopular). So our big generic drug exporters got a relief. Stocks like Sun Pharma, Cipla, Lupin spiked 3-4% in a single day after it was clear there’d be no new tariffs on their products. Pharma had been under pressure recently precisely on worry that drugs might get tariffed, so this exemption was a big relief rally. It’s a silver lining for that sector – one major export segment of India that dodged the bullet, at least in this first round.
Export-oriented manufacturers (textiles, apparel, gems & jewelry, auto parts, etc.): This is where there’s concern. Many of these industries count the U.S. as a key market. A 27% tariff will make Indian goods more expensive in America, which could hurt demand. For example, if an Indian textile company exports carpets or clothing to the U.S., those products now cost over a quarter more for American importers. That likely means fewer orders or pressure to cut prices (squeezing margins). These sectors aren’t heavily represented in our main stock indices (they’re mostly mid-sized companies), but they employ lots of people and could see a hit. I wouldn’t be surprised if the government considers some support for them, or they try to pivot to other markets.
Metals & Commodities: Global metal prices (like steel, copper) might soften because a trade war can slow down world demand. Indian metal companies were down initially but it wasn’t too dramatic yet. Steel was already under U.S. tariffs from before, so not much new there. But if China’s economy slows due to this, it could push down commodity prices – which actually can hurt our metal exporters but help our input costs domestically. Also, oil prices tumbled on the tariff news (traders fear less global growth = less oil demand). Brent Crude fell quite a bit. For India, a big oil importer, that’s actually a blessing in disguise: cheaper oil = lower import bill and lower inflation. So our macro could see a strange cushion from falling commodity prices even as trade suffers. Kinda ironic, but it’s a factor.
Domestic sectors: Things like banking, consumer goods (FMCG), domestic infrastructure – these are more tied to internal demand. They were relatively stable. In fact, market breadth in India was okay; I think smaller domestic-oriented stocks held up, possibly because if global players get hit, maybe local businesses face less import competition internally or just the fact that domestic economy might chug along if we manage inflation well. Foreign investors did pull out some funds (I read FIIs withdrew quite a bit in anticipation of the tariff move), but local investors seem to be buying dips in home-focused sectors.
From an investment stance, for Indian investors I’d say: be cautious on export-heavy stocks for now, but don’t panic-sell everything because India’s not at the worst receiving end here.
Our government is already responding calmly – instead of immediately retaliating (which could escalate things), they’re talking about negotiating a trade deal with the U.S. by end of the year to sort this out. That conciliatory approach might mean the 27% tariff could be temporary if a deal is reached. If that happens, any sell-off in good export companies could reverse. But if talks fail, those companies might be in for a tough time. It’s a bit of a binary situation.
One interesting angle: opportunities for India. Since China and others got hit even harder (China’s looking at effectively 54% total tariffs when you add this to existing ones!), U.S. importers will be scouting for alternatives. India, even with 27%, could still be a cheaper source than China+54% or Vietnam+46%. For example, an American company sourcing $100 worth of goods from China would pay $154 after tariffs, but if they source from India it’d be $127 – still high, but a lot less than $154. That could make certain Indian products competitive.
We might actually grab some market share in categories like apparel, footwear, certain machinery, etc., if buyers switch to avoid the steepest tariffs. Also, big multinationals like Apple have been moving some assembly to India – this gives them more incentive to ramp that up (iPhones made in India would face 27% tariff into the US vs 54% if made in China; a strong push to diversify production). In the long run, if India can capitalize on this and eventually negotiate the tariffs down through a deal, it could turn into a win. That’s likely why our officials said they’re also “studying opportunities” arising from this.
Also, watching the rupee: it hasn’t blown out yet, but if the dollar strengthens due to global fear, INR could weaken, which ironically boosts exporters’ earnings in rupee terms (they get more rupees per dollar of sales). That could partially offset the tariff hit for some industries. It’s a lot of moving parts!