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Trump’ tariffs and market fall
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Context
Indian stock markets saw a sharp fall exceeding 2.5% in key indices (Nifty 50 and Sensex) due to escalating global trade war concerns triggered by US President Donald Trump's unilateral tariff measures. This decline mirrors significant losses across global markets including the US, Asia, and Europe.
Global Market Impact
- US Market Crash: US stock markets lost over USD 6 trillion in value within two trading days, impacting major indices like the S&P 500, Dow Jones, Nasdaq 100, and Russell 2000.
- Asian Market Decline: Major Asian indices such as Nikkei 225 (-8%), TAIEX (-9.7%), Hang Seng (-13%), and SSE Composite (-7%) suffered significant losses, reflecting investor panic.
- European Market Reaction: Indices like the DAX (Germany), FTSE 100 (UK), CAC 40 (France) and STOXX600 were all trading with losses around 5%, with continued downward pressure predicted by US futures.
Underlying Causes of Market Fall
- Unilateral Tariffs by US: US President Trump imposed punitive tariffs globally, raising costs across industries without corresponding productivity gains, thus directly reducing corporate profits.
- Supply Chain Disruptions: Tariffs threaten the integrity of global supply chains, creating inefficiencies and raising uncertainty in production networks worldwide.
- Legal and Policy Uncertainty: Concerns over the legality, legislative backing, and sustainability of these tariffs persist, especially in absence of US Congressional approval, amplifying investor anxiety.
Implications for Indian Policymakers
- Short-term Optimism: Some view this as a temporary correction, with India's relatively lower fall indicating market resilience and potential buying opportunities.
- Long-term Strategic Shift: Others interpret this as a structural break in global trade, signaling the rise of protectionist policies and decline of multilateralism.
- Need for Self-Reliance: India may need to recalibrate trade policy, strengthen domestic manufacturing, and prepare to operate in an era of fragmented global trade norms.
Practice Question:
Q. Discuss the implications of unilateral tariff measures by the US on global trade architecture and evaluate India's policy response in the context of increasing protectionism.
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