Dalal Street Braces for Volatile Open Amid Trump's 15% Tariff Hike
Dalal Street is poised to open on Monday under a cloud of fresh uncertainty after US President Donald Trump announced an increase in temporary global tariffs on nearly all imports, raising them from 10% to 15%. This move came just a day after the US Supreme Court struck down his earlier broad tariff program, leaving investors questioning whether trade tensions are resurging.
Supreme Court Ruling and Immediate Aftermath
Earlier this week, the US Supreme Court ruled that President Trump exceeded his authority by imposing wide-ranging tariffs under an economic emergency law. Markets initially welcomed this verdict, with the Nifty index surging on relief that a significant trade-related risk had been removed. However, the reprieve was short-lived as just hours later, Trump imposed a 10% tariff under a separate legal provision, and on Saturday, he further hiked it to 15%, the maximum allowed under Section 122 of US trade law.
This section permits tariffs of up to 15% for a duration of 150 days, after which Congress must approve any extension. Trump also indicated that his administration may explore other legal avenues, including national security or unfair trade measures, to continue imposing import duties during this period.
Investor Concerns and Expert Insights
For investors, the primary concern lies less in the specific tariff rate and more in the unpredictability of US trade policy. Nilesh Shah, Managing Director of Kotak Mahindra AMC, commented, "The Street expectation is that the US will use various provisions of law to keep tariffs almost unchanged. Any change will be short-term and, hence, unlikely to impact market direction materially." Nonetheless, short-term volatility is widely anticipated.
Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, told ET, "An important aspect to monitor is the uncertainty surrounding the approximately $175 billion collected under tariffs over the past year and the potential implications of refund claims. That said, the situation remains fluid. Any fresh statements or alternative tariff actions under different presidential authorities could reintroduce volatility in the near term."
Critical Timing for Indian Equities
The timing of these developments is particularly critical for India, as equities have already been pressured by uncertainty surrounding US Federal Reserve policy and weak performances in IT stocks. Earlier this month, India and the US reached an interim trade understanding that lowered reciprocal tariffs on Indian goods to 18%, while India agreed to reduce certain tariffs and non-tariff barriers on US imports.
Sectors focusing on exports, such as IT, pharmaceuticals, textiles, and auto components, may react sharply to concerns over margins or demand. However, if markets view the 15% cap as temporary and largely in line with expectations, losses are expected to remain limited.
Overall, Dalal Street faces a challenging start to the week, with investors closely watching for further developments in US trade policy and their potential ripple effects on global markets.
