Trump’s Tariffs Trigger Global Panic, Market Meltdown | Image Source: indianexpress.com
NEW DELHI, India, 8 April 2025 – Global markets were launched to disarm this week after President Donald Trump’s aggressive pricing strategy revived fears of an imminent global recession. The fall was rapid and brutal: American values, European indices and major Asian markets collapsed, with Indian investors carrying the worst part of an almost unprecedented trout. The episode highlights a cold historical model: when the United States tightens its trade grip, the world economy is under pressure.
According to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management, each major U.S. tariff increase has historically preceded a recession. In a sincere conversation with ET Now, Shah established solid parallels between the current scenario and previous economic setbacks, such as the 2008 global financial crisis and the collapse caused by VOCID19. “If the engine of the world – the United States – drops, then all kinds of assets will feel the heat,” said Shah.
The final step of the Trump administration is to sweep tariffs for imports from China and other trading partners. Rationality? A concerted effort to reduce US fiscal and current account deficits has become politically sensitive. However, while the intention may seem economically sound, implementation has been much less.
Why Pricesparking Panic?
The concept of customs duties – particularly taxes on imported goods – may seem direct, but their effects of maturation are complex and far-reaching. Tariffs often increase the cost of imports, disrupt global supply chains and call for retaliation. According to a Zee News report, global investors have reacted strongly to these shocks, leading sales through shares, bonds and even cryptomons like Bitcoin.
Historically, both the abomination tariff of 1828 and the famous 1930 Smoot-Hawley tariff triggered economic contractions. The similarities are dark. Today, global financial institutions such as Goldman Sachs and JP Morgan have significantly increased their probability of recession from 20% to 45% and 60% respectively. And if the world’s largest economy falls, the rest of the world has no choice but to support itself for impact.
“There’s a price to pay for the U.S. tariff war,” Shah, adding, “India is better placed than many partners, but it won’t remain unexplored.”
What was the reaction of the Indian market?
Monday’s commercial session was noted by Indian market observers. The Indian indices collapsed by more than 4 to 5 per cent, exceeding within hours the market value of Rs 16 lakh crore. According to Business Today, this was the worst fall of a day since June 2024, with 82% of listed shares ending the day in red. India VIX – a key measure of volatility – increased by 66%, reflecting the growing anxiety of investors.
Despite this, Shah argues that India could still emerge relatively resilient. He noted that Indian exporters are currently subject to lower tariffs than many other emerging economies, which offers a potential competitive advantage if government and the private sector harmonize their strategies. “This is a time for coordinated action,” he said. “Can our entrepreneurs and decision-makers come together to benefit from it? »
Which sectors are most at risk?
The general economic consequences for India go beyond the loss of the stock market. According to NASSCOM, India’s IT sector employs more than 5.1 million professionals and earns 40-60% of its US income A recession in the United States would likely result in lower computer budgets, renegotiation of contracts and possible redundancies.
But the technology industry is not alone. India’s textile sector, the second largest employer after agriculture, is also on a turbulent terrain. India is ranked third among textile exporters in the United States, and any decline in U.S. consumption demand could significantly reduce revenues. In addition, the chemical industry, which accounts for 18 per cent of India ‘ s total exports to the United States, is likely to be subject to pressure, particularly because of its fragmented and largely unorganized structure.
“In sectors such as textiles and chemicals, even smaller shocks can quickly occur from local economies due to the prevalence of small businesses,” said an industry analyst named by Indian Express.
What can investors do in the midst of chaos?
As uncertainty worsened, financial advisors, media and Zee News called for financial prudence. Given the high volatility and potential job losses, individual investors are invited to:
- Cut discretionary spending
- Pause any major financial decisions like buying cars or homes
- Avoid personal loans and credit card overuse
- Preserve liquidity—cash is king in volatile markets
- Stick to large-cap stocks with strong fundamentals
Follow the Dharma of asset distribution, said Shah. It recommends continuing to invest in high-capacity equities, which are currently highly valued, and maintaining cash reserves in order to take advantage of possible decreases. Systematic Transfer Plans (STPs) are preferable to aggregate-sum investments to mitigate volatility risks.
Will India remain an oasis in the desert?
There is an impulse of hope in the midst of uncertainty. India, although affected, can offer relative stability compared to other emerging or even developed markets. As Shah rightly said: “We are an oasis in the desert, but let us not forget that a violent sandstorm continues to blow. »
Much depends on how Indian political leaders react. If they can navigate in the geopolitical field and promote an export-friendly environment, the country could turn the crisis into an opportunity. Sectors such as information technology, textiles and chemicals that are intensifying to take advantage of new markets or deepen US ties could provide a necessary buffer against global shocks.
In addition, capital can begin to circulate in safer emerging markets, such as India, especially when investors seek refuge from turbulence in the West. With the fragility of US-EU relations and political instability in developed markets, India’s relatively stable macroeconomic environment could begin to appear attractive. “Maybe the world will realize that the unpredictability of policy is no longer exclusive to emerging economies,” said Shah.
Key investor issues
Q: Why are global markets reacting so strongly to U.S. tariffs?
A: Tariffs increase costs, reduce supply chains and often invite reprisals, resulting in greater uncertainty. Investors hate uncertainty, and it triggers the sale.
Q: How bad is the market crash in India?
A: Very serious. Monday’s fall was erased on Rs 16 Lakh crore on the market. This is the worst day since June 2024, affecting 82% of the shares.
Q: Will India be insulated from a global recession?
A: Not completely. Although India is relatively better placed, the sectors that rely heavily on the United States – such as computer science, textiles and chemicals - will feel heat.
Q: What’s the outlook for crude oil and gold?
A: Crude oil fell to $60 per barrel, which is a low global demand of three years. Gold is also reduced, but can bounce back as a sure asset if uncertainty persists.
Q: How should retail investors prepare?
A: Prioritize liquidity, avoid new debt, reduce discretionary spending and consider accumulating high-quality shares during corrections.
Q: Could tariffs actually benefit Indian exporters?
A: Potentially, yes. If other countries face higher tariffs, India could fill some of the gaps in demand, as its exporters and policy makers act quickly and strategically.
In conclusion, the situation remains volatile. As a global feeling, Indian markets are trapped in crossfire. But with a prudent strategy, financial discipline and proactive policy formulation, India can still plan a stable course. What remains crucial is to avoid the reactions of knee sharks and navigate the storm in a clear, long-term perspective.
