Global Trade War Escalates and India’s Inflation Cools Down

In the past week, global stock markets experienced significant volatility, driven by escalating trade tensions and mixed economic data. In this blog, we’ll know in detail what happened last week (March 10, 2025 to March 14, 2025) all across the globe.

US Imposed Additional Tariffs on Canada

The U.S. stock market, in particular, faced a sharp decline after President Trump announced additional tariffs on Canadian steel and aluminum. This announcement triggered a sell-off, with the Nasdaq Composite plunging over 10% from its record high set in late 2024 and the S&P 500 falling nearly 9% from its February peak.

The market rout raised concerns as Trump’s back-and-forth tariff decisions fueled fears of a potential economic slowdown or even a recession. Investors are now closely monitoring February’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which will provide crucial insights into inflation trends and likely influence the Federal Reserve’s future monetary policy.

The global scenario remains highly unfavorable as the trade war initiated by Trump continues to escalate. His 25% tariff on steel imports has been swiftly retaliated against by the EU, which imposed tariffs on $28 billion worth of U.S. imports, while Canada also imposed tariffs on $20 billion worth of U.S. exports.

China Announced Retaliatory Tariffs

Last week, China quickly retaliated by imposing 10-15% tariffs on US farm products and indicated its preparedness for any type of war against President Donald Trump’s mounting trade tariffs.

Amid this global economic uncertainty, China’s stock markets displayed resilience, supported by proactive domestic policy interventions. These measures, including encouraging insurers to allocate more funds to A-shares, have helped stabilize the market.

At the same time, global investors are increasingly turning to China’s advancements in artificial intelligence as a source of growth, particularly in the Hong Kong market.

Hong Kong: Most Liquid Market

As Trump’s trade wars and erratic policy-making undermine confidence in the U.S. economy, Hong Kong’s $6 trillion stock market is gaining traction, especially as it becomes the preferred home for Chinese tech listings.

Hong Kong is also one of the most liquid equity markets globally, making it an attractive option for investors seeking stability amidst global uncertainties. Meanwhile, Japan’s stock market has shown resilience as well, reacting to both international geopolitical events and domestic economic conditions.

Despite global volatility, Japan’s equity markets have remained relatively stable, reflecting the country’s ability to navigate external pressures.

India’s Falling Inflation Comes as Relief

Back at home, persistent uncertainties surrounding global trade and fears of a U.S. recession are continuing to influence the momentum of the domestic market. While significant sell-offs in the U.S. and other Asian markets have been driven by concerns over an economic slowdown, exacerbated by the ongoing trade war, the domestic market has shown signs of consolidation.

However, the barrage of new policies from President Trump, particularly his fluctuating tariff moves against major trading partners like Canada, Mexico, and China, has increased uncertainty for businesses, consumers, and investors. Despite these challenges, the domestic macroeconomic environment remains positive.

The better-than-expected decline in CPI inflation to 3.75% in February has brought inflation below the Reserve Bank of India’s (RBI) target of 4%, while a surge in the Index of Industrial Production (IIP) in January to an 8-month high of 5.01% suggests a desirable growth-inflation balance.

Conclusion

This favorable macroeconomic backdrop sets the stage for a potential rate cut by the Monetary Policy Committee (MPC) in April. Looking ahead, the global cues, particularly from the U.S., are likely to continue driving volatility in the Indian stock market as external uncertainties persist. So, open a 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.