India’s Stable Growth Amidst US-China Trade Tensions

In the week gone by, global stock markets have experienced significant volatility driven by escalating U.S.-China trade tensions, tariff policy shifts, and central bank responses. In this blog, we’ll know in detail what happened last week (April 14, 2025 to April 18, 2025) all across the globe.

Trump Imposes 245% Tariff on China

The Trump administration escalated the trade war by imposing a 245% tariff on Chinese imports, retaliating against China’s export controls on rare earth minerals vital for U.S. high-tech manufacturing, such as semiconductors.

This move threatens supply chain disruptions, deepening bilateral strains. Rising U.S. Treasury yields and a weakening U.S. dollar amplified market uncertainty. Federal Reserve Chair Jerome Powell’s hawkish remarks, dismissing near-term rate cuts due to persistent inflation and trade-related economic uncertainties, further dented investor sentiment.

Nvidia’s announcement of a $5.5 billion first-quarter charge, tied to U.S. export restrictions on its H20 AI technology to China and other nations, underscored corporate vulnerabilities. U.S. consumer confidence plummeted, with the University of Michigan’s Index of Consumer Sentiment dropping to 50.8 in April-its lowest since June 2022-fueled by trade war fears.

Europe on Rate Cut Path

European markets, however, found some stability. A U.S. tariff pause on non-Chinese imports and discussions on boosting defence spending lifted sentiment. Expectations of a 25-basis-point rate cut to mitigate tariff impacts and address Germany’s economic stagnation bolstered sentiment.

Euro area inflation eased to 2.2% in March 2025, down from 2.3% in February, offering mild relief. Yet, investor concerns lingered over weakening corporate earnings exacerbated by uncertainties from Trump’s tariff policies.

China’s Healthy GDP Growth

In China, first-quarter GDP growth of 5.4% year-on-year surpassed expectations, but sequential growth of 1.2% disappointed, reflecting trade war pressures.

To offset the impact of tariff, the country was seen weakening Yuan and plans for more stimulus measures through both fiscal and monetary support for the economy, however, its success would only show in GDP prints for the coming quarters.

Japan’s markets drew optimism from U.S. tariff exemption negotiations, while the Bank of Japan is expected to raise rates to 0.75% by year-end, signalling policy normalization.

India’s Macro Stability in Place

Back at home, in a truncated week, the Indian market has navigated a complex landscape marked by global trade tensions, domestic economic indicators, and sector-specific developments. India’s macroeconomic stability, marked by moderating inflation and a robust bond market, positioned it favorably among emerging markets.

BlackRock’s endorsement of Indian bonds and gold as portfolio diversifiers, combined with U.S. tariff exemptions for tech products like smartphones and computers, reinforced this strength.

The Reserve Bank of India’s debt purchase initiatives and potential fiscal measures to support growth amid global challenges further supported sentiment. With inflation at multi-year lows, investors anticipate 50-basis-point rate cuts in June and August.

A major positive was the signing of terms of reference for the initial phase of a bilateral trade agreement between India and the U.S., aiming to finalise it by the end of the year, with a broader goal to boost bilateral trade to $500 billion by 2030.

Future Outlook

Looking ahead, Indian markets brace for volatility driven by March 2025 quarterly earnings and evolving trade war dynamics. The banking sector is expected to report weak Q4 FY25 due to slower loan growth, while telecom and IT along with consumer goods are expected to report improved earnings, but management commentary will be crucial as companies adapt to the shifting global trade landscape.

India’s structural resilience and proactive policies offer a buffer, though markets will remain sensitive to global and domestic developments. 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.