Trump’s ‘Kind Reciprocal’ Tariffs Prove Not So Kind to Market: What Should Indian Investors Do Now?

In a move described by President Donald Trump as a “Liberation Day” for American industries, the US announced a new round of “kind reciprocal” tariffs aimed at supporting domestic manufacturing and increasing government revenues. 

Like what you're reading?

Get our latest, straight to your inbox.

Subscribe to our newsletter

While intended to protect national interests, such measures often have wider global consequences. India, in particular, could feel the effects across its supply chains.

The imposition of a 26% tariff on certain imports has already had a significant impact. The Indian stock market saw a sharp decline, with nearly ₹14 lakh crore in value erased on April 7, 2025.

In this blog, we will explore how these new tariffs could affect India’s economy, market, and potentially the everyday lives of its citizens.

Stock Market Trembled like a Ship in Storm

After President Donald Trump announced steep tariffs, Major indices across the US, Europe, and Asia fell as investors feared a slowdown in global trade. The Dow Jones dropped significantly, Japan’s Nikkei fell nearly 8%, and European stocks also declined. The uncertainty led to a wave of selling across markets, with investors moving away from risky assets.

In India, the impact was immediate. 

On April 7, NIFTY Volatility index rose to 22.79 from 13.76 

The Nifty 50 index saw its biggest single-day fall in 10 months, dropping over 740 points

Sectoral Impact:

• Vulnerable: Autos, Metals, IT & Pharma (export-heavy)
• Resilient: FMCG, Utilities (domestically focused)

India’s stock markets didn’t take the tariff news lightly—and the damage wasn’t limited to just one corner. IT companies, many of which draw a significant chunk of their revenue from the US, took a clear hit, with the Nifty IT index falling by 2.5%.

The metals sector saw a sharp selloff, plunging 6.75%, while financial stocks dropped by 3.5%. Even the market giants weren’t spared—HDFC Bank, ICICI Bank, and Reliance Industries, which together carry a massive 32% weightage in the Nifty 50, each slipped around 3.5%.

The broader market felt the tremors too. Small-cap and mid-cap indices tumbled 3.9% and 3.6%, respectively—marking their worst trading day in nearly three months.

In short: April 7, was a red day, and the pain was widespread.

Although the Nifty 50 recovered by 1.69% on April 8 after its sharp fall the previous day. However, it slipped again on April 9, ending 0.61% lower.

So, What Should You Do With Your Investments?

The sharp fall in markets can be nerve-wracking. Animesh Hardia shares his perspective on the current situation: The Indian market has been in a correction phase for about six months, influenced by FII outflows, stretched valuations, weak earnings in certain sectors, and broader global economic concerns—all of which have been exacerbated recently by heightened volatility stemming from the global tariff war initiated by Donald Trump.

During market downturns, quality investments quietly prepare for future growth. The only thing truly under your control is your behavior.

Here’s the most time-tested strategy

• Let your SIPs continue
• Avoid trying to time the market

The stock market operates in cycles. A significant sell-off is typically followed by a strong comeback, meaning that the market’s best days often closely follow its worst days. Therefore, selling out of the market may feel like a safe option, but it can lead to missing out on the benefits of staying the course. Remember the old saying: “Time in the market is more important than timing the market.

Focus on What you Can Control

Focus on what is within your control. While it is not a time to make sweeping changes if you want to rebalance your portfolio, go for it. Asset allocation is key to success in the long run. Due to tariff turmoil, some sectors are more adversely affected than others. Use this opportunity to review your asset allocation—a balanced mix of equity, debt, and alternatives can reduce volatility.

For better results you can check  https://indiamacroindicators.co.in/asset-allocator.

A tool that tailors your investment strategy to your age and India’s current economic phase, optimising your portfolio for growth and stability

Shrinking Rupee rattles further

Over the course of the current financial year, the rupee has depreciated by more than 2%, due to global economic uncertainty. But the rupee has to face a new challenge.  

As of April 9, 2025 the rupee fell to a two-week low on Tuesday, pressured by a weaker yuan and a recovery in the dollar index. It closed at 86.27 against the US dollar, down from 85.84 on Monday. In two sessions, the rupee has declined by 103 paise.

Here’s a quick snapshot of the rupee’s recent slide and the mounting pressures it faces in a world rattled by trade wars and shifting alliances.

A weaker rupee makes imports more expensive and pushes inflation higher. Impact is felt on everything, on fuel, electronics, or groceries,and the cost of living could inch upward, straining household budgets.

For Indian households, that could mean higher bills for everyday essentials like food, fuel, and electronics.

Gold and Silver Might Shine Bright

Whenever global uncertainty spikes, precious metals like gold and silver tend to shine. These assets are traditional safe havens, and with ongoing trade tensions and inflation concerns, their appeal is likely to stick around.

This was also accompanied by a repo rate cut. Historically, during periods of global uncertainty that lead to repo rate reductions, gold has consistently outperformed the Nifty 50.

How Tariff Moves Might Influence Gold

Gold responds to the ripple effects that tariffs create across inflation, investor sentiment, and currency strength. Here’s a breakdown of how and why tariffs affect gold prices in different scenarios:

1. ↑ Tariffs + ↑ Uncertainty → Gold Prices Go Up

Tariffs often signal the beginning (or escalation) of trade conflicts. This creates market uncertainty and raises the risk of global economic slowdown. During uncertain times, investors typically shift their money into “safe haven” assets like gold, which historically hold value better than equities or currencies in volatile environments. As it was witnessed during the U.S.-China trade war in 2018–2019, gold prices rose nearly 20% as tensions escalated and investors sought safety.

2. ↑ Tariffs + ↑ Inflation → Gold Prices Go Up

Tariffs make imported goods more expensive, which can raise overall price levels—i.e., inflation. Gold is a traditional hedge against inflation because its value tends to rise as currency purchasing power falls.

In the 1970s, during a period of stagflation (slow growth + high inflation), gold prices soared more than 500% as inflation eroded fiat currency value.

3. ↑ Tariffs + Strong USD → Gold Prices Flat or Down

Gold is priced in US dollars. So when the dollar strengthens—often because investors flock to it as a safe haven or because higher U.S. tariffs improve the trade balance—it becomes more expensive to buy gold in other currencies. This limits global demand for gold and can keep prices flat or even push them down.
In 2022, despite inflationary pressures, gold remained largely flat because the U.S. dollar index (DXY) surged due to aggressive Fed rate hikes and global capital inflow into dollar assets.

Also Read  – https://1finance.co.in/blog/gold-has-a-golden-history-but-will-it-have-a-shining-future/

Market turbulence, like the one triggered by Trump’s tariff moves, is a reminder that external shocks are an inevitable part of investing. But it’s not the storm—it’s how you sail through it that determines your long-term success.