Domestic equity benchmarks Sensex and Nifty fell marginally in Friday's trade, tracking a selloff on Wall Street overnight, as uncertainty over Trump tariffs finally started weighing in on US stocks. There are serious concerns over the inflationary impact of US tariffs on the US economy. Markets in export-led Japan tumbled 2 per cent today; Chinese markets, like India, were calm though.
"President Donald Trump suspended on Thursday the 25 per cent tariffs he imposed this week on most goods from Canada and Mexico. This is the latest twist in a fluctuating trade policy that has whipsawed financial markets and fanned worries over inflation and a growth slowdown," said Devarsh Vakil, Head of Prime Research at HDFC Securities.
Vakil said investors are keenly awaiting Friday’s employment report to gauge the health of the US economy and the Federal Reserve’s future interest rate trajectory amid fears the new tariffs, coupled with rising raw material costs at factories, may push inflation higher in the coming months.
At 9.25 am, Sensex was trading at 74,168.99, down 171.10 points or 0.23 per cent. Nifty stood at 22,502.85, down 41.85 points or 0.19 per cent.
"Trump dilly dallying on tariffs with the latest decision to postpone imposition of tariffs on Canada and Mexico to April 2nd is being viewed by markets seriously. Markets feel that Trump is keen to negotiate deals rather than stick to high tariffs for the long term. This is acknowledgement of the fact that high tariffs will impact the US economy, too," said VK Vijayakumar of Geojit Financial Services.
India is among countries on which reciprocal tariffs would be imposed from April 2. A 25 per cent tariff has already been imposed on aluminium and steel, which accounted for under 2 per cent of India’s export to the US. At worst, 30 per cent or $25 billion of India’s merchandise exports to the US may be impacted, said Nirmal Bang Institutional Equities.
Vijayakumar noted that the sell-off in the US stock markets overnight also is an indication that Trump’s policies might impact growth and earnings in the US.
Jefferies, meanwhile, has increased the weightage in China by 2 percentage points and cut India's weight by one percentage point.