Trump tariffs trigger a global stock market bloodbath, Indian Sensex and Nifty nosedive: Concerns of trade war and recession loom
Fears regarding a potential Black Monday crash are proving to be reality, with a dramatic downturn in global stock markets following a steep decline in the Dow Jones and S&P Futures on 6th April, triggered by United States President Donald Trump’s “Liberation Day” tariffs. On 7th April, Indian stock markets were met with a similar fate with the Sensex crashing by 4,000 points and the Nifty 50 dropping below 21,800 in early transactions.
The BSE Midcap and Smallcap indices also fell by as much as 10 per cent. The bloodbath erased ₹20.16 lakh crore of wealth for investors. The average reduction in India’s automotive, IT, metals, pharmaceutical and energy infrastructure indices was 7%. As investors prepare for greater short-term uncertainty or risk, the volatility index, also known as the India Vix, increased by 59.4 per cent to 21.9, fearing a derail in global supply chains and GDP in midst of a potential trade war after China’s reaction.
The impact on Asian markets has been severe, as both Japan and Taiwan have hit circuit breakers for the first time since March 2020. The global stock market crash has resulted in the loss of trillions of dollars in market capitalization, negatively influencing the shares of many of the largest corporations worldwide.
Some countries are already rushing to defuse the situation. Taiwan proposed a plan that would completely eliminate tariffs. Giorgia Meloni, the prime minister of Italy, promised assistance to the affected local industries. India has opted for moderation, at least for the time being. “Talks are ongoing, and we are evaluating our options,” an Indian official reportedly stated.
US tariffs, China’s retaliation leave global impact
The United States applied a standard 10% tariff on all arriving foreign goods as of 5th April and the country switched to a matching tariff system from 9th April and charge import taxes that are equivalent to those implemented by other countries. The White House officials also announced that about 60 of the “worst offenders” will be subject to specific reciprocal tariffs. Equity markets suffered an abrupt sell-off, with benchmark indices plunging more than 5% in early trading, amid a worldwide meltdown spurred by the development and China’s retaliatory actions.
The US imposed a 34% reciprocal tariff on China which responded in kind as Chinese products will now face tariffs exceeding 54%. Global investor morale was further clouded by concerns of an impending recession in the biggest economy in the world. The likelihood of a US recession in the upcoming year has increased from its initial estimate of 35% to 45%, according to a revised assessment by Goldman Sachs. JPMorgan Chase went so far as to warn that a recession could hit the US economy this year.
Markets around the world faced panic selling as Trump refused to alter his fluctuating tariffs in spite of China’s move and the mounting volume of global recession warnings. Beijing indicated it was taking the new US tariffs head-on, intensifying the trade battle between the two largest economies in the world as nations around the world rushed to mitigate their impact.
China and Japan’s benchmark indices have also dropped by 10% and 8%, respectively, indicating wider concerns, according to Vikas Jain, Head of Research at Reliance Securities. “The US S&P 500 dropped 6% on Friday (4th April), while the Dow Jones fell over 2,000 points. its worst performance since the COVID-19 crisis. China’s decision to impose a 34% reciprocal tariff on all US imports starting 10th April has only made matters worse,” he expressed.
Julia Lee, Head from FTSE Russell, a subsidiary of the London Stock Exchange Group voiced, “Tariffs are feeding into expectations around inflation and a recession.” In the worst week for the US stock market since 2020, the S&P 500 slumped nearly 6%, while all three of the country’s major stock indices fell more than 5%.
Image via The Times of India
A considerable deceleration in the US economy would lead to substantial consequences for Asian exports, given the critical role the US plays as a market for goods from this region. Qian Wang, Asia Pacific chief economist, at investment firm Vanguard pointed out, “Asia is bearing the brunt of the US tariff hike. While there could be some room for negotiation, a new regime of higher tariffs are here to stay. This is negative to the global and Asia economy, especially those small open economies, both in the short term and long term.”
Frank Lavin, a former Undersecretary for International Trade at the US Department of Commerce outlined, “Asia is likely to feel a disproportionate brunt of this turmoil because Asia sends more exports to the US than to other markets.”
Global sell-off is dampening market sentiment
The panic on Wall Street was reflected in Asian stocks. The Nikkei 225 in Tokyo slid 7%, the Shanghai Composite lost more than 6%, the Hang Seng in Hong Kong plummeted by about 11%, and the Kospi in South Korea fell 5%. Japanese stock futures hit lower circuit limitations in early trading, forcing a brief pause. The Dow Jones Industrial Average plunged 5.50%, the S&P 500 tumbled 5.97% and the Nasdaq decreased 5.82% on Wall Street.
Trump levied a reciprocal tax of 26% on India, however, it is less than the tariffs slapped on major textile exporters to the US, such as Vietnam (46%), Bangladesh (37%), Cambodia (49%), and Pakistan (29%). All 30 constituents of the Sensex were showing negative performance in the market. Tata Steel experienced a drop of more than 10 per cent, while Tata Motors recorded a reduction of more than 9 per cent. Significant losses were also incurred by industry titans including Infosys, HCL Tech, Tech Mahindra, Reliance Industries, TCS and L&T.
“Markets are going through extreme volatility driven by deep uncertainty. No one knows how this tariff turmoil will evolve, and that is keeping investors on edge globally,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Service noted. The chaos was compared by some investors to “Black Monday,” the biggest one-day decline in Dow Jones history, which occurred on19th October 1987, when the index crashed 23% due to ongoing trade and budget deficits in the US.
Tariffs sow fears of trade wars, recession and global backlash
As President Donald Trump’s broad tariffs fueled fears of a worldwide recession and steep price increases for large categories of goods in the largest consumer market in the world, nations all over the world threatened to launch a trade war with the United States. Trump’s sanctions caused global financial markets to crash and other leaders who were facing the end of a decades-long period of trade liberalization condemned them.
Prime Minister Shigeru Ishiba of Japan, one of the closest trading allies of the US, complained that the tariffs had caused a “national crisis” as Tokyo’s stock market headed for its worst week in years due to a decline in banking shares. The US tariffs would be the largest trade barriers in over a century which might raise the cost of everything from Apple’s iPhone to running shoes to cannabis for American consumers.
According to estimates from Rosenblatt Securities, if Apple passes the expenses on to customers, a high-end iPhone might cost around $2,300. Businesses rushed to adapt. While General Motors (GM.N), which opened a new tab, stated it would enhance US manufacturing, automaker Stellantis announced it would temporarily lay off US workers and close operations in Canada and Mexico.
According to Canadian Prime Minister Mark Carney, the US has renounced its longstanding position as an advocate for global economic cooperation. He added, “The global economy is fundamentally different today than it was yesterday.” China pledged to respond to Trump’s imposition of 54% tariffs on imports, a sentiment echoed by the European Union, which is subject to a 20% duty.
European nations were urged to halt their investment in the United States by French President Emmanuel Macron. Japan, South Korea, Mexico, among other trading partners stated that they would postpone any response for the time being in order to negotiate concessions. Britain is trying to reach an economic agreement with the United States, according to the country’s foreign minister.
However, both Washington’s supporters and adversaries forewarned of a catastrophic damage to international trade. International Monetary Fund (IMF) Managing Director Kristalina Georgieva asserted that the tariffs “clearly represent a significant risk to the global outlook at a time of sluggish growth,” and she urged Washington to try to ease trade tensions with its allies and lower uncertainty.
As economists warned that the tariffs might affect business profitability, disrupt supply chains and reduce demand, stocks fall apart globally and the US dollar plummeted while oil prices were poised for their worst week in months. A large number of American companies that produced in other countries suffered.
James Lucier, founding partner at Capital Alpha emphasised, “The tariff plan does not appear to be well thought-out. Trade negotiations are a highly technical discipline, and in our view these proposals do not offer a serious basis for negotiations with any country.” According to economists, the tariffs could elevate the probability of a US recession, spark inflation again and increase expenses for the American family by thousands of dollars. Analysts warned that the tariffs could undermine strategic attempts to restrain China and alienate friends in Asia.
“We now expect real GDP to contract under the weight of the tariffs, and for the full year (4Q/4Q) we now look for real GDP growth of -0.3%, down from 1.3% previously,” JP Morgan’s chief US economist, Michael Feroli announced. He also mentioned that it is predicted that the recession will “push the unemployment rate up to 5.3 per cent.”
Trump introduced a 25% tax on South Korea and a 24% duty on Japan, both of which are home to significant American military installations. Additionally, he enforced a 32% tariff on Taiwan to China’s growing military pressure on the island. The biggest trading partners of the United States, Canada and Mexico, were not hit by targeted tariffs, but they already incur 25% tariffs on multiple items and now have to pay additional duties on auto imports.
How vulnerable is India
India is closely linked to international trade and investment flows, just like the majority of open economies. Export-focused companies will be directly impacted by a slowdown in global growth and cross-border trade, and if overall growth slows, local enterprises will also see second-order repercussions.
India’s imports totaled $839.39 billion in FY25, while its exports of goods and services totaled over $750 billion. During the same year, India’s GDP was estimated to be $4 trillion, with imports accounting for 21% and exports for 19%, illustrating the country’s vulnerability to global value chains. India’s biggest trading partner, the United States, is also one of the few nations with which the former recorded a trade surplus in 2023–2024.
India’s exports to the US are subject to an additional average duty of 26%, which is a significant setback even though it is less than the tariffs placed on a number of other Asian exporters. The possible disruption of global supply chains due to retaliatory trade measures is anticipated to put pressure on earnings and valuations of listed Indian companies.
Image via The Times of India
Growing investor involvement and disciplined investing through systematic investment plans (SIPs) have been the main drivers of the recent boom in retail inflows into stocks. Inflows of mutual funds through SIPs increased 37% from ₹1.9 trillion in FY24 to ₹2.6 trillion in FY25 (April–February), according to data from the Association of Mutual Funds in India (Amfi). A significant increase was also observed in retail investors’ direct stock investments. These investors could be hurt by the current increase in volatility.
The global context continues to be worrisome. With a 23% decline from its record high of 20,204.58 on 16th December to 4th April’s close of 15,587.79, the Nasdaq has formally entered bear market territory. With their weight of 11.91% on the Nifty, second only to financial services at 37.30% as of March-end, this means that Indian IT stocks, especially those of major exporters, will be under greater stress.
On the other hand, Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group earlier stated, “With lower tariff rates than key peers and a modest impact on exports, India may even gain from supply chain shifts. Domestic growth, inflation, and equities remain on solid ground, turning a global trade headwind into a potential strategic tailwind.” The impact on India’s GDP, he added, would be limited to about 0.2%, even in the worst-case scenario of a 10% drop in exports to the US.
India is predicted to maintain strong growth in the 6.5-7.5% range over the next two to three years, notwithstanding trade frictions worldwide, owing to comparatively solid domestic demand and a significantly higher weighting of local versus foreign demand.
Economist Niven Winchester also examined the potential effects of reciprocal tariffs on the GDP of key nations worldwide, including the US, in a piece published on “The Conversation.” India’s GDP would alter by only about 0.19%, which would have a detrimental effect of $28 per household each year. At the current currency rate, that amounted to about ₹2396.28 annually for each household.
Image via The Conversation
He presented another scenario that demonstrated the economic consequences of other nations refusing to react to US tariffs. This situation is entirely theoretical, though, as retaliatory tariffs have been proposed. Under such circumstances, there could have been a 0.01% increase in India’s GDP, which would have translated into an annual increase of $1 at the household level.
A defiant Donald Trump
Trump reiterated his stance on reducing deficits with the country’s trading partners, stating that he would not engage in any agreements until this issue was addressed. He maintained that other nations will need to shell out “a lot of money” to lift the broad reciprocal tariffs that were put in place last week. According to him, he wasn’t worried about the major sell-off as the US stock market has lost around $6 trillion in value just last week.
“I think your question is so stupid,” he angrily slammed a reporter’s question concerning the “pain threshold” of American consumers as concerns about sharp price hikes and a market slump deepen.”I don’t want anything to go down. But sometimes you have to take medicine to fix something. We’re going to become a wealthy nation again, wealthy like never before,” he declared as it seemed that the world’s financial markets would continue to fall precipitously. He even claimed that European and Asian countries were “dying to make a deal” with the US.
He also defended his decision on his social media platform Truth Social, calling the tariffs a “very beautiful thing to behold” as traders around the world braced for more turbulence after suffering severe losses.
Both senior trade adviser Peter Navarro and US Commerce Secretary Howard Lutnick also affirmed that the proposed tariff hikes were not negotiable and the president would not back down.
According to Washington over the course of less than a month, the goals of these tariffs have also been transforming. They have shifted from national security issues (such as fentanyl and immigration inflows) to the revised justification of the need to balance trade deficits and prevent America from being undervalued. The Trump administration has also been arguing that the exercise will generate revenue for the projected tax cut that is anticipated later this year.
The officials claimed the tariffs would open up export markets overseas and create manufacturing jobs domestically, but they warned that results would take time while Trump has insisted the “reciprocal” duties are a response to restrictions placed on US exports. In just two trading sessions to end the week, Donald Trump’s declaration of significant tariffs on US trading partners worldwide, including India, destroyed $5.4 trillion in market value.
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