US stock index futures recorded a sharp cut on Thursday as President Donald Trump’s tariff strike on major trade partners, including India, stoked fears of a major trade war and heightened recessionary risks. Last checked, Nasdaq 100 Futures plunged 4.52 per cent in pre-market trade while S&P 500 Futures and Dow Jones Futures were down 3.51 per cent and 2.89 per cent, respectively.
Trump’s “Liberation Day” announcement introduced tariffs ranging from 10 per cent on imports from a number of countries to 50 per cent on goods from specific nations. The effective tariff rate is even higher on Chinese imports, exceeding 50 per cent when combined with existing duties. This aggressive trade policy shift by the US sent shockwaves through global markets.
Nuvama Institutional Equities said Trump’s approach and solutions have been unilateral, aggressive and disruptive, adding that a recession in the US is inevitable without the US Federal Reserve’s proactive offset.
“Given how policies are stacking up in terms of sequencing, we think the path to expansionary deleveraging could be through a US downturn/recession. This shall be painful in the near term but would pave the way for a more balanced global rebound, including in EMs (India too). Such a setup of low/negative real rates and leveraging in creditor countries could be akin to the 2002–07 global upswing. While risk assets would benefit in such a regime, gold may still outshine all others,” the domestic brokerage stated.
Sharing his views on the aftermath of Trump’s tariff, market veteran Arun Kejriwal believes that inflation is now going to rise in America. “The dividing line between inflation, stagflation and recession is fairly thin. So, I believe things could be worse off for America as the rest of the world. It means that global markets need to find replacement for all the money that was flowing into America because the economy was roaring and it need not be the same going forward. There would be a flight of capital from the global markets in America to some other countries. If we are able to get our act together, valuation tends to improve. If we stop being sentimental about valuations, this could be a great time for stock booking in our country,” he told Business Today.
On the domestic front, the overall sentiment remained bearish despite some resilience shown by sectors like pharma and PSU banks. “In India, the IT sector was particularly affected, with the Nifty IT index plummeting nearly 4.21 per cent due to the tariff implications on technology exports. Overall, the tariffs imposed by the US have introduced significant uncertainty and risk for Indian exporters, contributing to the downside movement in the market,” said Vaibhav Vidwani, Research Analyst at Bonanza.
