Navigating Market Turbulence: Tariffs, Inflation, and the Shifting Landscape of Stocks

The global financial markets in early 2024 were immediately jolted by the announcement of tariffs imposed by then-US President Donald Trump on goods from Canada, Mexico, and China1 .... This move triggered widespread concerns about a potential trade war and its detrimental impact on global economic growth. The immediate aftermath saw a sharp sell-off across Asian markets, reflecting the interconnectedness of the global economy and the sensitivity of investor sentiment to trade policy shifts

Initial Market Reactions to Tariff Threats (Early 2024)

The CNBC-TV18 broadcast captured the immediate market anxiety. US stock futures plummeted following Trump's tariff announcement, with futures tied to the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 all experiencing significant declines2 . Canada and Mexico swiftly retaliated with counter tariffs, while China announced its intention to challenge the US tariffs through the World Trade Organization

Asian markets bore the initial brunt of the negative sentiment. The Hang Seng index in Hong Kong, the Taiwanese index, Japanese markets, and the Kospi in South Korea all traded significantly lower. Notably, the Taiwanese index suffered a substantial drop, attributed to Taiwan being a major exporter to the US.The GIFT Nifty also indicated a gap-down start for the Indian markets

Concerns extended to commodity markets as well. Oil prices jumped due to fears of crude supply disruption from Canada and Mexico, although gains were capped by the prospect of lower fuel demand amidst trade tensions In the metals sector, tariffs on Canadian and Mexican metals led to anticipated price increases in the US, a net importer of copper, aluminum, and zinc, while prices declined on the London Metal Exchange

The Indian Budget Amidst Global Uncertainty (Early 2024)

Against this backdrop of global trade uncertainty, India's Finance Minister Nirmala Sitharaman announced the Union budget . While the budget aimed to stimulate consumption through tax sweeteners for the middle class and focused on fiscal consolidation and infrastructure spending, the immediate market reaction was overshadowed by the external headwinds emanating from the US tariff announcements. Sectors like FMCG, tourism, and auto initially showed some resilience, potentially buoyed by domestic consumption-focused announcements, while capital goods and defense sectors did not fare as well. The absence of Foreign Institutional Investors (FIIs) on the budget day also contributed to a mixed reaction.

Federal Reserve's Stance and Inflationary Pressures (Early 2024 & March 2025)

Concerns about the inflationary impact of these tariffs quickly emerged2 .... Experts suggested that US consumers would ultimately bear the cost of the tariffs through higher prices for imported goods. This development added another layer of complexity to the Federal Reserve's ongoing assessment of the US economy and its fight against inflation.

Fast forward to March 2025, and the impact of these earlier trade policies, along with new developments, continued to weigh on market sentiment. Federal Reserve meeting minutes released in March 2025 revealed that officials had agreed in January that further evidence of declining inflation would be necessary before considering lowering interest rates. The minutes also explicitly mentioned concerns about the potential for President Trump's tariffs to hinder progress on inflation.

Navigating Market Turbulence_ Tariffs, Inflation, and the Shifting Landscape of Stocks

Finanse Bez Owijania

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