Analyzing Donald Trump's Tariff War And Its Impact On The Stock Market
Markets around the world, including in India, have been affected by President Donald Trump’s tariff war, which has contributed to increased uncertainty. Due to this tariff, major stock markets worldwide, along with India, were down in the past few days.
The ongoing uncertainty and market volatility have hampered investor sentiment, and there has been a heavy sell-off in all global markets. In this blog, let us understand Donald Trump’s tariff war and its impact on the international stock market.
Donald Trump's Tariff War
A tariff is a tax that a government charges on goods coming into the country. Looking at the tariff war history, after Donald Trump became president again in 2024, he brought back and raised tariffs.
In March 2025, a 25% duty was imposed on steel and aluminum sourced from multiple foreign suppliers1. Shortly thereafter, a broader levy of no less than 10% was applied to most imported goods2. Selected nations, with China among them, faced considerably stricter terms.
On 2 April 2025, Trump announced tariffs on various nations, where major economies like India were given a tariff of 26%, China 34%, Japan 24%, the European Union 20%, and many more countries were imposed tariffs.
| Country | U.S.A. Reciprocal Tariffs |
| Cambodia | 49 |
| Vietnam | 46 |
| Thailand | 36 |
| China | 34 |
| Taiwan | 32 |
| Indonesia | 32 |
| Switzerland | 31 |
| India | 26 |
| South Korea | 25 |
| Japan | 24 |
| European Union | 20 |
| Israel | 17 |
Source: White House3
The main objective behind introducing these tariffs was to reduce the U.S. trade deficit and encourage domestic manufacturing. By imposing tariffs, they aimed to pressure other nations into lowering their tariffs and opening their markets for American products.
Many countries expressed concerns that the tariffs were incorrect and not justified. China on 4 April 2025, responded to the tariffs with a counter-tariff of 34% on the U.S. starting from 10 April, which has further escalated the trade war4. In response, President Trump has again retaliated and warned China with a total of 104% tariff on Chinese imports effective from 9 April 2025, if they don’t roll back their imposed tariffs5.
The 104% reflects a cumulative charge, adding to earlier actions including a 20% levy introduced in March and the 34% declared the week before. The initial rate had been tied to accusations concerning fentanyl shipments, a synthetic opioid implicated in the ongoing drug crisis in the United States. These unfolding developments underscore the accelerating momentum of the US-China trade war.
Direct Effects Of Tariffs On Indian Industries
The ongoing tariff imposition is expected to have various impacts on India's income. Now that we have understood what is tariff war is, let us try to understand in detail the tariff war's impact on India and key sectors:
1. Impact on Manufacturing Sector
India exports a significant share of its manufacturing goods to the U.S., which accounts for around 18% of the country’s total exports for the year 2023-20246. They include mobile phones, gems, jewellery, machinery, and petroleum products. A rise in the tariff will increase the product cost, which will severely impact the margins and the market share of the companies.
2. Influence on Agricultural Exports
Tariffs are expected to impact India’s agricultural exports to the U.S., particularly products like ghee, butter, milk powder, seafood, and gherkins, which may become more expensive and less competitive. India is making exports worth USD 181.49 million to the U.S. Edible oil is exported worth USD 199 million, and alcohol, wine, and spirits account for USD 19.2 million7. This shows that the ongoing tariff war could lead to reduced trade income and possible job losses in those industries.
3. Effects On The Technology Sector
The I.T. sector is a major exporter of its services to America. Increased costs on components such as semiconductors, hardware, and electronics have disrupted supply chains and raised production expenses for tech companies. This concern was already present in India, and it was expected that the IT sector would be impacted. The fear of imposition of a tariff is expected to bring down the revenues of I.T. sector by approximately 1.3% in the fourth quarter of FY258. Major stocks like TCS tumbled by 9% on 3 April 2025 after the tariff news was announced9.
Stock Market Response To Tariff Announcements
The Indian and global stock markets were shaken by sudden global trade news, as the tariff war's impact on the global economy became more evident, making investors nervous as tensions grew. The following was the effect seen right after the announcement:
A. Indian Stock Market Reaction To Tariff Announcements
Before the day of the tariff news, India’s benchmark index Nifty 50 was trading at 23,352. After the announcement, it began to fall and reached a low of 21,742 on 7 April 202510. Similarly, the Sensex dropped from 76,663 to 71,447 on 7 April 2025, largely due to the impact of the tariffs news.
The overall index crashed so badly that some even called it "Black Monday," where in a single day Sensex was down by more than 2,500 points and the Nifty 50 by over 1,000 points, leading to an INR 19 lakh crore market value wipeout from the Indian markets due to the India U.S. tariff war11. In the below-mentioned image, we can see the downtrend in the markets.
B. Global Stock Market Reaction to Tariff Announcements
Tariffs had a serious impact not only on the Indian and U.S. stock markets but also on global markets, which experienced significant declines. On 7 April 2025, the steepest drop was observed in the Hong Kong market, which fell by over 13.5%, followed by the China stock market, where indices corrected by around 9%. In addition to these, several other major global share markets also witnessed notable corrections:
Index | Country | Change (%) |
| Nikkei 225 | Japan | -7.83 |
| Hang Seng | Hong Kong | -13.22 |
| Shanghai Composite | China | -7.34 |
| Shenzhen Composite | China | -9.66 |
| S&P/ASX 200 | Australia | -4.23 |
| KOSPI | South Korea | -5.57 |
| Taiwan SE | Taiwan | -9.7 |
| Sensex | India | -3.6 |
| Dow | United States | -5.5 |
| S&P 500 | United States | -5.97 |
| NASDAQ | United States | -5.82 |
| STOXX Europe 50 | Europe | -5.34 |
Source: Tradingview (7 April 2025)12
C. How to Handle Stock Market Fluctuations
During such times when the markets are volatile and bearish, to maintain a stable income, investors can use the strategy of diversification, where they can invest in other asset classes to reduce risk and get more stable and consistent returns. Below are a few examples of opportunities that offer fixed returns to add stability to your portfolio.
1. Government Bonds: These are the securities which are issued by the Government of India. They are usually considered safe, as these bonds are sovereign in nature and provide a stable return.
2. Corporate Bonds: Corporate bonds are issued by private companies and come with different credit ratings. The highest-rated ones (AAA) are considered the safest and usually belong to financially strong companies. There are also high-yield bonds with lower ratings that offer higher returns but come with more risk. Investors can choose based on how much risk they’re comfortable taking.
3. Securitised Debt Instruments (SDIs): Securitised Debt Instruments (SDIs) are financial products created by bundling home or car loans, converting them into tradable securities, and then selling them to investors. These investors receive returns from the repayments made by the original borrowers. This process helps banks free up capital to issue more loans while providing investors with a steady income. To earn fixed returns of up to 14% from rated, regulated, and secured corporate bonds and SDIs, click the link below and register now on Grip Invest.
4. Gold: Gold acts as a hedge against market volatility, so investors can also make use of gold as an investment option to protect themselves from losses during the downturn of equity markets.
5. Peer-to-peer (P2P) Lending: Peer-to-peer (P2P) lending is a digital platform-based model that connects individual borrowers directly with investors, cutting out traditional financial institutions. For investors, it offers a chance to earn higher returns compared to conventional fixed-income options, by lending to verified borrowers across risk profiles. With proper due diligence, it can be a smart way to diversify and boost your investment portfolio.
6. Asset Leasing: Asset leasing is an investment model where investors fund tangible assets—like equipment or vehicles—which are then leased to businesses for regular rental income. It allows investors to earn stable, predictable returns backed by real assets, often higher than traditional options like FDs. Asset leasing also helps diversify portfolios while contributing to the growth of operational businesses.
7. High-Yield Corporate Fixed Deposits: Corporate Fixed Deposits (Corporate FDs) are term deposits offered by companies to raise capital, usually at higher interest rates than traditional bank FDs. They provide fixed, periodic returns and are suitable for investors looking for stable income. However, since they are unsecured, it's important to assess the company's credit rating and financial health before investing.
Future Implications Of The Tariff War
The ongoing tariff war may affect trade and the economy in many ways in the future. Here are some possible changes and outcomes we might see in the coming months:
1. Potential for Trade Agreements: As per government data and officials, India and the U.S. are working on a new trade deal under the Trump administration to boost business between the two countries13. The agreement aims to reduce taxes on goods, remove trade barriers, and improve supply chain links. A U.S. team led by Brendan Lynch visited India to discuss the details.
The goal is to increase trade from USD 191 billion to USD 500 billion by 203014. While both sides hope to finish the first half by fall 2025, the talks may take longer. India is the only country where the Trump administration has sent a trade team. In the coming months, there might be possible outcomes or updates regarding the ongoing negotiations.
2. Economic Forecasts and Stock Market Predictions: The overall market sentiment is expected to remain cautious as long as uncertainties around the global trade situation persist. The long-term outlook is supported by India’s status as an emerging economy, with growth and corporate earnings expected to improve over time, according to market analyses. Currently, as of April 2025, the benchmark index Nifty 50 is trading at a price-to-earnings (P/E) ratio of 20.1x, which is on the lower end relative to its recent trends.
3. Shift in Global Trade Dynamics: In the meantime, there is a shift in global trade dynamics. Since the markets are underperforming and remain highly volatile and uncertain, investors are looking toward other investment options like gold and debt instruments, which are considered a haven during market downtrends. As of April 2025, the price of gold has approached a new all-time high, with MCX Gold surpassing the 91,000 mark15.
Also Read: Stock Market Crash Predictions 2025: What Financial Gurus Are Saying
Conclusion
The tariff war has had a severe impact on the global economy, leading to uncertainty and a significant wipeout of investors' wealth. Overall, countries need to come together and find a way to resolve this issue through mutual negotiations. Until then, markets may continue to remain in a downtrend. Investors need to make investment decisions very cautiously and stay updated on recent market trends. Diversification is the way to protect your portfolio during these downward trends.
Frequently Asked Questions On Tariff War
1. How can investors navigate changes caused by tariffs?
To navigate the changes brought about by tariffs, investors may choose to buy when prices fall so they can lower their average cost and stay invested for the long term. Alternatively, they may opt for fixed-income instruments such as corporate bonds or SDIs, which potentially offer stable returns, or may also choose to invest in gold, which traditionally serves as a hedge against market volatility and economic uncertainty.
2. What is meant by a reciprocal tariff?
A reciprocal tariff is a trade policy wherein a country imposes tariffs equivalent to those levied by another country on its exports, to ensure fairness in international trade by creating a level playing field between trading partners.
3. What are Trump’s tariffs on India?
U.S. President Donald Trump imposed a 26% tariff on certain Indian exports, and it is expected that both countries will engage in dialogue and negotiations to resolve the issue with the goal of mutually reducing tariff barriers.
4. Who collects tariffs in India?
In India, tariffs, commonly known as import or export duties, are collected by the Central Board of Indirect Taxes and Customs (CBIC), which operates under the Ministry of Finance, Government of India and is responsible for the administration and collection of customs duties across the country.
References:
1. PWC, accessed from: https://www.pwc.com/ca/en/services/tax/publications/tax-insights/us-impose-tariffs-steel-aluminum-imports-2025.html
2. Center of Strategic and International Studies, accessed from: https://www.csis.org/analysis/liberation-day-tariffs-explained
3. White House, accessed from: https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-I.pdf
4. Reuters, accessed from: https://www.reuters.com/world/china-impose-tariffs-34-all-us-goods-april-10-2025-04-04/
5. BBC, accessed from: https://www.bbc.com/news/articles/c8rgkkl7v8lo
6. The Hindustan Times, accessed from: https://www.hindustantimes.com/india-news/how-will-trump-s-reciprocal-tariffs-affect-india-the-impact-on-vital-sectors-explained-101743682048391.html
7. The Hindu, accessed from: https://www.thehindu.com/news/national/us-donald-trump-liberation-day-tariffs-sectors-affected-in-india/article69403045.ece
8. The Economic Times, accessed from: https://economictimes.indiatimes.com/tech/technology/how-trumps-tariffs-will-impact-the-tech-sector/articleshow/119947119.cms?from=mdr
9. The Economic Times, accessed from: https://economictimes.indiatimes.com/markets/stocks/news/it-stocks-in-focus-as-trump-tariffs-fuel-inflation-fears/articleshow/119928465.cms?from=mdr
10. Trading View, accessed from: https://www.tradingview.com/chart/UvoXoMWX/?symbol=NSE%3ANIFTY
11. The Economic Times, accessed from: https://economictimes.indiatimes.com/markets/stocks/news/stock-market-crash-rs-19-lakh-crore-wiped-out-as-sensex-starts-with-whopping-3000-pt-cut-nifty-below-21800/videoshow/120052581.cms?from=mdr
12. Trading View, accessed from: https://www.tradingview.com/chart/UvoXoMWX/?symbol=NSE%3ANIFTY
13. Ministry of Commerce & Industry, accessed from: https://pib.gov.in/PressReleasePage.aspx?PRID=2118182
14. The Economic Times, accessed from: https://economictimes.indiatimes.com/news/economy/foreign-trade/india-us-want-to-expedite-talks-for-proposed-trade-agreement/articleshow/119951095.cms?from=mdr
15. Trading View, accessed from: https://in.tradingview.com/chart/UvoXoMWX/?symbol=BSE%3ASENSEX
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