30 Indian Minds Leading the AI Revolution

Tariff uncertainty roils markets, investors rattled

After the steep tariff hikes announced by Donald Trump on April 2, the US president's flip-flops have resulted in volatility on the Street

By Nasrin Sultana

Published: Jul 11, 2025 11:40:38 AM IST

Updated: Jul 11, 2025 11:53:53 AM IST

US President Donald Trump, US Secretary of State Marco Rubio (L) and US Defense Secretary Pete Hegseth (R), at a cabinet meeting at the White House Image: Andrew Harnik / Getty Images Via AFP

A tide of uncertainty is roiling markets across the globe leaving investors rattled, and unable to take a firm strategic position on investments and assets. Tariff chaos unleashed by US president Donald Trump threatening to trigger a retaliatory global tariff war among major economies, policy uncertainties and rising geopolitical tensions are creating a muddled pool of volatility and ambiguity into asset valuations and capital flows.

“From India to Vietnam to Japan, national authorities are anxious to make conciliatory overtures to the US administration,” say strategists at DBS. Asia thrives on trade, and with nearly 30 percent of global consumption attributed to the US, the imperative to avoid the worst of the tariff storm and find opportunities in the middle of these challenges is understandable.

As India and other countries are waiting for a decisive deal with the US on tariff and trade (at the time of writing), Trump posted letters to 10 Asian countries, announcing their new reciprocal tariff rate, effective August 1. Trump’s letters to 14 countries on July 7 outline higher tariffs if they don’t make trade deals with the US by the deadline.

“The higher-than-expected tariffs will likely reinvigorate policymakers to make some concessions and get across the finish line. The August 1 deadline also gives some time for Asian policymakers to negotiate a better deal from here,” says Sonal Varma, chief economist, India and Asia ex-Japan, Nomura. She expects India to strike a favourable trade deal soon, while negotiations continue for Thailand and Indonesia.

On aggregate, tariffs were similar or higher for five countries and lower for only three than those announced on April 2. Transshipment as a clause has also been inserted for all countries. Transshipment is the process of transferring cargo—such as containers or goods—from one mode of transportation to another, or from one vessel to another, during its journey from origin to destination.

For all countries, Trump’s letter stated that goods transshipped to evade a higher tariff will be subject to that higher tariff.

Trump said the US would impose tariffs of 25 percent on goods from Tunisia, Malaysia and Kazakhstan, with levies of 30 percent on South Africa, Bosnia and Herzegovina, climbing to 32 percent on Indonesia, 35 percent on Serbia and Bangladesh, 36 percent on Cambodia and Thailand and 40 percent on Laos and Myanmar, according to Reuters.

Trump also threatened leaders of developing nations in the BRICS grouping meeting in Brazil, with an additional 10 percent tariff if they adopt "anti-American" policies, reports Reuters. The bloc includes Brazil, Russia, India and China among others.

Following the steep tariff hikes announced by Trump on Liberation Day (April 2), it was his flip-slop stance that amplified uncertainties, bringing a fresh wave of market volatility. On April 9, Trump announced a 90-day pause on his sweeping tariffs on all countries except China.

Trump had singled out China, the largest exporter to the US, and subsequently raised its tariffs to 125 percent, up from 104 percent earlier. The cumulative tariff rate on China is now 145 percent.

In addition, the White House stressed that the “baseline” 10 percent tariff on imports from most other nations would remain in effect during the 90-day pause. This follows an earlier executive order of tripling the tariff on smaller parcels from China valued at less than $800 from 30 percent to 90 percent effective May 2—a move that affects an estimated annual $40 to $45 billion of largely ecommerce imports.

“Liberation day was a defining moment in 2025 as news of reciprocal tariffs roiled financial markets. However, the impact of Trump 2.0 extends far beyond tariffs: The entire international trade and geopolitical landscape faces a potential sea change,” strategists at DBS say.

According to Hou Wey Foo, CIO, DBS, rhetoric from the Trump administration suggests policy ambiguity will be an ongoing feature for the next four years, and this means rising risk premium for US financial assets and, certainly, a greater need for agility in investors’ portfolio positioning.

As we approach the second half, Foo believes three themes will dominate the narrative and determine the trajectory of markets. Those are pragmatism and the de-escalation of tariff tension, divergence and polarisation in equity performance. Lastly, fiscal headwinds are negative for government bonds and the dollar which is positive for gold.

Also read: West Asia crisis: Is India insulated?

Where does India stand?

India is one of the preferred markets by DBS due to lower export dependence, accommodative monetary policies, and supportive policy frameworks aimed at bolstering internal growth. India’s limited exposure to US tariffs with exports at 2.3 percent of GDP and falling oil prices augur well.

Equity markets have also seen reversal of net foreign institutional investors (FII) inflows. Easing inflation, a lower terminal repo rate and estimates of a well-spread-out monsoon are some of the key catalysts contributing to India’s growth. FIIs were net buyers for the fourth consecutive month, investing $2.4 billion in June. Domestic institutional investors also showed healthy inflows, amounting to $8.5 billion in the same month.

Over the last 12 months in US dollar terms, the MSCI India Index (up 1 percent) has underperformed the MSCI Emerging Markets Index (up 13 percent). However, over the last 10 years, the MSCI India Index has outperformed the MSCI EM Index by a stellar 90 percent.

Currently, Indian benchmark indices Sensex and Nifty have gained around 7 percent this year and have largely stayed volatile for the most part of 2025.