- The President of the United States of America, Donald Trump, has unleashed an economic war on the global community with the introduction of trade tariffs is stating the obvious. What was feared all along when the rhetoric of the maverick leader hit high notes during the campaign trail last year and his subsequent coronation as the President has come true. The stock market mayhem witnessed around the world highlights how the investors are viewing the tariff war as a meltdown that would singe the global economy big time. As expected, China has steadfastly refused to be cowed down to Trump’s single-minded obsession with import tariffs. In fact, Chinese leadership has imposed further tariffs on American products as a counter measure in a sign of escalation.
PC: Mint
- So where does this tariff war end up? Of course, stock markets don’t know how much worse it can get. But indications are that it can get plenty worse. Stock markets from Tokyo to London and New York convulsed again, although it wasn’t quite a replay of 1987’s Black Monday – when Dow Jones crashed 22.6%. Sensex and Nifty closed about 3% lower, but Hang Seng lost 13.2%, Nikkei almost 8%, and Kospi 5.6%. European stocks are trending lower, and US futures are also down. That’s three days of steady market decline since Trump unleashed the tariff monster on the global community. Notably, gold prices are softening, a sign that investors are selling this safe haven asset to recoup losses in other investments.
PC: YouTube
- Needless to mention, markets are hurting because of the uncertainty created by US tariffs. Nobody knows how they will hit demand and growth or how long they will last. While the US commerce secretary said last week that the 10% baseline tariff would stay in place for days and weeks, Trump himself said the overall tariffs – as high as 46% for Vietnam, 49% for Cambodia, and effectively 54% for China would remain until America’s trade deficits disappear. Moreover, China’s 34% retaliatory tariff on US goods has spooked markets further. So, it’s a Cold War all over again, with tariffs, not the nukes that we most fear. With US stocks on a downward spiral, even Trump backers are worried that tariffs may lead to a self-induced economic nuclear winter.
PC: Jobaaj
- All the gloom so far has arisen from tariff announcements. When tariffs bite a few weeks or months from now, the market sentiment may hit bottom. But it’s not about stock prices alone. Major market downturns have usually presaged a US recession, and both Goldman Sachs and JP Morgan revised the probability of a recession last week. It is warned that even if there’s no recession, tariffs will slow down growth. Many countries will rush to negotiate trade deals. Nonetheless, China isn’t bending, and it’s impossible to make any complex product without some Chinese components, so US and Chinese tariffs will be felt across the globe. India should negotiate a friendly trade deal to end uncertainty, keeping the interests of farmers in mind.
