New Delhi: Despite budget boost, equity benchmark indices Sensex and Nifty tumbled in early trade and the rupee hit a record low of 87.29 against the US dollar on Monday after President Donald Trump imposed massive tariffs on Canada, China and Mexico over the weekend. Trump’s tariffs have sparked fears of a broader trade war.
The BSE Sensex was down by more than 400 points to 77,084 at 11 am. The Nifty 50 dropped to 23,320 after losing over 160 points around the same time. Around 2pm, BSE Sensex was trading at 77,181.84, down by more than 320 points.
Larsen & Toubro, NTPC, Tata Steel, Power Grid, Tata Motors, Reliance Industries, ICICI Bank and Tata Consultancy Services were among the major laggards. Titan, Maruti, Nestle and Bajaj Finserv were among the gainers.
“Despite an excellent Budget, the market will be under pressure from the Trump tariffs and the heightened global uncertainty these ‘initial round of tariffs’ has triggered,” VK Vijayakumar, the Chief Investment Strategist at the Geojit Financial Services, told PTI.
Meanwhile, the Congress took to social media to attack the NDA government’s Budget 2025 for the fall of rupee.
Markets are giving thunderous applause for the Budget. Rupee fell by 77 paise and hit a record of 87.28 pic.twitter.com/WqKfRrHLc9
— Congress Kerala (@INCKerala) February 3, 2025
What’s the tariff war?
Mexico and Canada are United States’ biggest trading partner. They have already announced a retaliation after Trump imposed tariff of 25%. A 10% tariff is also imposed on China. An economic conflict between China and the United States started since January 2018, when President Trump began setting tariffs and other trade barriers on China. He had done so to make changes to what he said to be ‘long-standing unfair trade practices and intellectual property theft.’
Cascading effect on other countries, where does India stand?
While trade war with the US could push Mexico and Canada into a recession, it is likely to have a cascading impact on other economies. This is because more or less every country in the world is dependent on each other for trade. For now, India is not in the Trump’s tariff’s list as New Delhi and Washington are not on bad terms. But if there is a global trade and economic slowdown, experts opined that India may get affected. However, others experts also opined that China and Mexico’s pain can be India’s gain. India may leverage the opportunities of tariffs on these two countries and start exporting as alternate source, they believe.
In an interview with the Hindustan Times, when Finance Minister Nirmala Sitharaman was asked about India’s approach to the potential effects of these tariff, she had acknowledged that while the country would be monitoring the situation closely, it was too early to predict the direct consequences.
