Global Markets Witnessed Tariffs and Monetary Policy Changes

In the year gone by, global markets were shaped by a dynamic interplay between monetary easing and tariff-driven uncertainty, with technology and AI emerging as key highlights amidst geopolitical tensions and inflationary pressures. In this blog, we’ll know in detail what happened last week (April 7, 2025 to April 11, 2025) all across the globe.

US Fearing Recession Cycle

The U.S. market began 2024 on an optimistic note, fuelled by strong growth, enthusiasm for Al, and Federal Reserve rate cuts starting in September 2024 as inflation eased. Trump’s re-election initially boosted confidence with promises of tax cuts and deregulation.

However, his tariff policies – imposing an additional 10% tariff on Chinese imports and 25% tariffs on major partners like Mexico and Canada by early 2025, alongside plans for broader reciprocal tariffs – heightened geopolitical friction.

This eroded business confidence and slowed investment, despite a soft economic landing with 2.8% GDP growth in 2024, raising concerns of a potential recession and high inflation in the U.S.

Europe Continued to Face Uncertainty

In Europe, markets displayed regional disparities amid ongoing challenges. Germany grappled with economic stagnation, elevated energy costs, and declining export demand, while France faced fiscal uncertainties.

Nevertheless, optimism from Russia-Ukraine ceasefire talks, increased defence spending, and ECB rate cuts-with more anticipated in 2025-offered some relief. Yet, the shift in U.S. trade policy introduced fresh uncertainty, complicating the outlook.

China-US Trade War Impact

China’s market, meanwhile, began 2024 sluggishly due to weak growth but rebounded strongly in the second half. Unprecedented government stimulus-including rate cuts, housing support, and an RMB 500 billion stock stabilization fund-sparked a rally.

Low valuations and technological advances, such as DeepSeek’s AI breakthroughs, drew foreign investment, lifting sentiment. This momentum likely persisted into early 2025, supported by expectations of continued accommodative policies, though escalating U.S.-China tensions, a lingering property crisis, and deflationary risks remained threats.

Japan Raised Interest Rates

Japan marked a significant shift, as the Bank of Japan ended its eight-year zero-interest-rate policy, raising rates to 0.5% in January 2025-the highest since 2008. This move aimed to establish a “virtuous cycle of rising wages and prices, breaking Japan’s deflationary mindset while strengthening the yen and promoting long-term economic stability.

However, Trump’s tariff policies, expected to dampen global demand, could offset these gains, potentially prompting the BOJ to pause or slow its tightening plans.

FPI Outflows from India

Back at home, the Indian market maintained its strong performance from the previous year, repeatedly hitting all-time highs. This was driven by strong participation from domestic investors and government initiatives like the PLI scheme and infrastructure spending.

Sectors such as electricals, renewable energy, and manufacturing benefited from policy tailwinds, while IT and financial services leveraged digitalization and credit growth. The BJP-led NDA’s third consecutive term reinforced expectations of policy stability. However, slowdown in economic growth in the second and third quarters, and weak corporate earnings fuelled FPIs’ concerns over high valuations.

A stronger U.S. dollar, elevated yields in developed markets, and a higher short-term capital gains tax drove FPI outflows of ₹1,27,041 crores. Trump’s tariff announcement on April 2, 2025, imposing a 26% reciprocal tariff on India, further soured global and Indian market sentiment, sparking a sharp sell-off.

Global Markets Get a Big Relief

Subsequent suspension of country-specific tariffs for 90 days and introduction of uniform 10% duty, except for China, which faced a steep 145% tariff due to its retaliatory action, has been positively received by stock markets, signalling relief for cooperative trading partners.

Though uncertainties tied to the U.S.-China trade conflict and global economic concerns remain on the back of Trump’s tariff policy post 90 days, alongside the ceasefire negotiation talk in the Russia-Ukraine war and peace talks in West Asia.

Conclusion

Looking ahead, the Indian market is poised for volatility with a positive bias, contingent on policy clarity and AI adoption. India’s resilience in recent years, underpinned by strong manufacturing and service sector activity-albeit at a slower pace-offers hope.

Lower crude oil prices, RBI’s accommodative policy stance and inflation within the RBI’s target range enabled a 50 pbs cut in the repo rate, in two phases, while still leaving space for additional cuts to spur growth. Adapting policy measures to navigate the evolving global trade landscape will be critical in sustaining this momentum.

So, open Demat account with SMC Global Securities and invest as per your investment objective and risk profile.

Reference:
SMC Global Securities’ Research Team

Author: All Content is verified by SMC Global Securities.