Global Stock Markets Crash Amid Tariff Fears

Why in the News ?

Global stock markets, including India’s, are experiencing a major downturn following fears of stagflation due to President Trump’s aggressive tariff policies. Indian fund managers urge caution, recommending large-cap investments and a long-term horizon amid global economic uncertainty.

Global Stock Markets Crash Amid Tariff Fears

Reasons Behind the Market Crash:

  • The crash is largely attributed to fears of stagflation in the US, triggered by President Trump’s unfolding tariff war.
  • Markets are anticipating reduced global growth and lower corporate profits.
  • Since Trump’s second inauguration on January 20, 2025, volatility has surged globally.
  • Historical references to US tariff wars in 1828 and 1930 highlight the negative consequences of protectionist policies.

Impact on India and Investment Outlook

  • While India is economically resilient, it is not immune to global market stress.
  • Experts advise following the “asset allocation dharma” with a focus on large-cap stocks.
  • Mid- and small-cap stocks are still relatively expensive.
  • Investors should adopt a staggered investment approach (e.g., via Systematic Transfer Plans) rather than lump-sum investments.
  • A potential global slowdown could impact India’s FY26 growth via trade, remittances, and exports.

Silver Linings and Future Strategy:

  • India’s exposure to lower tariffs compared to others may present export opportunities in sectors like textiles, toys, and footwear.
  • Rebalancing trade by increasing imports of US defence and energy goods can aid ties.
  • The crisis may push the US toward renegotiations, offering India room to benefit from global supply chain realignments.