Of course, these new energy tariffs and the trade war between the US and China are the cause of the current turmoil in the stock market, which we should take notice of. The numbers already have an effect on it, and I will tell you why this will have something to do with your investment plan.
You know what’s interesting? What it is not is just standard trade friction; it is a new phenomenon of the importance of trade tensions. On February 4, 2025, specifically, the US also began to impose a 10% tariff on China’s imports of LNG. One single day, the Shanghai Composite dropped 0.65% when China retaliated with its tariffs. Boom.
Then, it’s the changes in Indian markets that really started getting my interest. At its lowest ever on January 3, 2025, India’s rupee hit ₹87.28 per USD. Why does this matter? As the country already imports 87% of its oil in USD, anything that involves the use of fuel will be more expensive.
Quick facts to keep in mind:
- India’s external debt: $682 billion (June 2024)
- Recently, foreign investors pulled out ₹1,327 crore
- Expected GDP growth: 6.3% in 2025 (Goldman Sachs forecast)
However, there is a silver lining to the picture and one can think over it. India is the fourth largest GSI gainer from trade diversions due to the 2017-2019 trade war. Oxford Economics has claimed that if domestic products become expensive, the export to the US could be raised by $25 billion. It is present in different sectors of the World Market, which are chemicals, automobiles, pharmaceuticals, textiles, electronics and electrical.
The United Kingdom, the European Union, and the European Free Trade Association alone are together putting in $100 billion over the next 15 years in India. In this period, when the monetary policy of RBI is to be relatively easy – eased by 0.25% in February 2025 and is likely to ease further on April 25, 2025, it does so.
From a global perspective, Mexico and Canada have a large exposure with the potential of 25% US tariffs to their 20-30% GDP exports to the US. According to Global Growth Projections, world output will grow by 3.3% this year, and by 3.5% in 2025, figures well below historical averages, which would support the continued susceptibility of markets to trade-related developments.
If there is a need for an investment strategy, individuals should focus on export-oriented companies that can benefit from trade diversions but remain careful with companies highly dependent on imports or those with significant USD-denominated debt. Higher input costs may press the consumer goods sector for margins. For this to succeed, careful analysis of the sector must be combined with constant monitoring of developments in global trade.