Markets Rally On Tariff Pause—Is India The Next Big Winner?

Trump’s Tariff Freeze: A Relief Rally with Uneven Effects

Donald Trump’s April 9 declaration—a 90-day tariff hike pause for all countries except China—triggered an instant global reaction. Investors welcomed the temporary de-escalation of trade tensions, especially given the high-stakes rhetoric around “trade realignment” and “domestic reshoring.”

The policy announced via the CNN Town Hall and confirmed by White House briefings explicitly spared U.S. allies and strategic partners—but hit China with fresh 12.5% tariffs on $18 billion worth of imports.

“A lot of countries are kissing my ass to make a deal,” Trump declared. That crass bravado masked a real pivot: a short-term global easing to stabilize economic sentiment.” 

Global Markets React: From New York to Tokyo

Markets	Index	% Change (2 days)
USA	Nasdaq	2.8
Europe	Euro Stoxx 50	1.6
Japan	Nikkei 225	2.1
Hong Kong	Hang Seng Index	0.4
China	Shanghai Composite	-1.3
India	Nifty 50	1.5

While U.S. and European markets surged, the Chinese market slipped, underlining investor anxiety over the renewed pressure from Washington. Japan’s Nikkei and India’s Nifty 50 also posted gains, buoyed by hopes that they could absorb some of China’s export market share. 

Why the Pause? Economic Pressures Meet Diplomatic Positioning

The U.S. faces stubborn inflationary pressures despite the Fed’s restrictive rate stance and solid GDP growth of 2.3% in Q1 2025. As of March 2025, the core Personal Consumption Expenditures (PCE) price index rose by 2.8% YoY—above the Fed’s 2% target (source: U.S. Bureau of Economic Analysis).

Higher tariffs risked fanning the inflationary flame just as the Fed considers easing.

Rising import costs due to tariff risk are exacerbating this issue. A Goldman Sachs research note said the 90-day pause could shave 0.2 percentage points off expected inflation, easing some pressure on the Fed’s rate trajectory.

Additionally, with the 2024 election cycle behind him and a 2025 economic recovery in sight, Trump is walking a tightrope between populist trade protectionism and market stability. 

For Trump, this is economic realism cloaked in bravado:

• Avoid domestic inflation 
• Calm global supply chains 
• Reassert U.S. dominance without full escalation.  

According to NDTV, the move also aims to “buy time” for fresh negotiations with allies like the EU, Mexico, and India.  The exception? China.

China Targeted—Again

China remains the main adversary in Trump’s trade calculus. The 12.5% tariff on Chinese products includes industrial machinery, electronics, and EV components—a calculated blow aimed at Beijing’s export engine.

Data from Statista shows that China remains America’s third-largest trading partner, with bilateral goods trade totaling $575 billion in 2024. However, China’s trade surplus with the U.S. was $254 billion last year, and Trump’s administration argues these tariffs are correcting an “imbalance.”

China’s immediate response has been restrained, possibly wary of escalation amid its slowing GDP growth, which slipped to 4.4% in Q1 2025 compared to 5.2% in Q1 2024 (Source: National Bureau of Statistics of China).

Why China Was Singled Out

The fresh 12.5% tariff targets Chinese electronics, EV parts, solar panels, and advanced machinery—sectors aligned with Beijing’s “Made in China 2025” strategy. The goal: stall China’s climb up the value chain while promoting U.S. industrial revival.

“It’s not about trade anymore—it’s about tech and control,” notes a recent Brookings Institution analysis.

With China’s Q1 GDP slipping to 4.4% and industrial output slowing, the tariff hit is poorly timed. The Shanghai Composite dropping 1.3% reflects rising investor caution about Chinese equities amid fears of retaliation and slowing exports. 

Global Ripple Effects: Currency Moves, Commodities, and Supply Chains 

Currency Movement (Post-Announcement)

Currency	Change vs USD (April 9–10)
Euro (EUR)	0.6
Japanese Yen	0.9
Indian Rupee	0.4
Chinese Yuan	-0.5

The yuan weakened, reflecting concerns over export competitiveness and capital outflows. In contrast, the yen and rupee strengthened slightly, showing investor confidence in Asia ex-China economies.

Commodities:

• Brent Crude dipped 1.2% to $84/barrel, on easing supply chain fears.
  
• Copper surged 1.8%—a signal of anticipated industrial activity pick-up.
  
• Gold fell 0.6% as risk appetite returned.

India: A Strategic Sweet Spot?

India has positioned itself as a non-aligned, neutral player with diplomatic flexibility and growing economic weight.

According to Morgan Stanley, India could attract $45 billion in FDI in FY2025–26, up 40% YoY, driven by:

• Diversification away from China (China+1 strategy) 
• Production-linked incentives (PLI) for electronics, semiconductors, and green tech 
• Trade talks with the U.S. for sectoral partnerships 

India’s exports to the U.S. rose 9.7% YoY in Q1 2025, driven by textiles, pharma, and software services. And with no tariff escalation risk, Indian manufacturers now enjoy a level playing field.

What Happens After 90 Days?

Markets treat this as a window of calm, not the war’s end. If no deals are struck, tariffs could be reinstated post-July—just ahead of the U.S. Fed’s anticipated policy pivot.

Key watchpoints:

• U.S.-EU and U.S.-India bilateral negotiations 
• China’s retaliation or concessions 
• Fed’s inflation data and rate trajectory 
• Mid-year earnings revisions by multinationals
  

Tactical Relief, Not Strategic Resolution

Trump’s 90-day tariff pause has injected optimism into the global economy—but it also underscores how trade is now a tool of geopolitical leverage, not just economic protectionism.

For India, this moment offers more than just respite—a runway to deeper integration with global supply chains. It’s another warning shot for China in an increasingly zero-sum game with the West.

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