The Indian rupee experienced a decline against the US dollar on Thursday following an announcement by US President Donald Trump regarding new tariffs on imports from various countries, including India. The rupee opened at 85.75 per US dollar, which equates to Dh23.36, reflecting the immediate impact of the tariff news.
President Trump imposed a 26% tariff on imports from India, effective from April 9. This move is part of his broader strategy to introduce tariffs on imports from several countries as part of his “America First” trade policy. These new tariffs add pressure to the global economic situation, particularly for emerging markets in Asia, where several currencies have been affected.
The new tariff regime, which also includes a 10% baseline tariff on all imports starting April 5, has stirred concerns among traders. Other countries affected by the new measures include China, which faces a 34% tariff, and the European Union, which faces a 20% tariff. For many countries, this tariff increase represents a significant escalation in trade tensions, and the market is reacting to the uncertainty these tariffs bring. 
Currency Impact and Market Reactions
Currency traders have expressed mixed reactions to the rupee’s performance. One trader at a Mumbai-based bank remarked that if the rupee’s decline is “only” this much, it’s still a manageable outcome, considering the overall expectations. “I would have expected the dollar/rupee exchange rate to surpass the 86 level,” the trader added, acknowledging that the situation could have been worse.
The Indian rupee’s slide is not isolated. The new tariff measures have significantly impacted currencies in Asia, especially in emerging markets. According to ING Bank, the average tariff rate announced by Trump is higher than anticipated, placing additional pressure on currencies in Asia, particularly the Indian rupee, as well as the Vietnamese dong, South Korean won, Indonesian rupiah, and Thai baht. These Asian emerging market currencies could see tariffs ranging between 25% and 45%, significantly affecting trade balances and economic growth in these countries.
As a result of these developments, other currencies like the offshore Chinese yuan also felt the pressure. The yuan dropped to a one-month low of 7.3482 against the US dollar before recovering slightly to 7.32. The yuan’s decline reflects the uncertainty created by Trump’s tariff policies, as China has been one of the biggest targets of his tariff strategy.
Stock Market and Economic Sentiment
The global stock markets also reacted negatively to Trump’s tariff announcement. US equity futures saw a near 3% drop, and Japanese stocks experienced similar declines. The tariff news weighed heavily on global markets, suggesting that investors are concerned about the broader implications of these trade measures.
In India, the stock market was set for a weak opening, with investors bracing for possible negative impacts on key sectors. Indian equities have shown vulnerability in the wake of the tariff announcement, with expectations that trade disruptions could reduce export opportunities and slow economic growth.
The global financial markets have also witnessed a decline in US Treasury yields, signaling investor concerns about the potential economic fallout from these tariffs. As the world’s largest economy, the US’s actions are being closely watched for their effect on global growth, and the fear is that this trade war will lead to a slowdown, affecting both developed and developing economies.
Long-Term Impact on India’s Trade
For India, the impact of these tariffs is multifaceted. The 26% tariff on Indian imports could severely affect key industries such as textiles, chemicals, and machinery, which are among India’s largest exports to the US. The added tariffs may reduce the competitiveness of Indian products in the US market, which could hurt India’s trade balance and weaken the rupee further.
Moreover, the global trade environment remains uncertain. While India has been working on strengthening its economic relationships with other countries, including looking for new markets for its exports, the imposition of tariffs by the US could delay these efforts. The Indian government will likely need to consider new measures to counteract the economic damage from these tariffs, including potential diplomatic steps or trade agreements with other partners.
The global reaction to the US tariffs will likely influence how trade policy evolves over the coming months. Countries around the world, particularly those in emerging markets, will need to navigate this new economic landscape carefully.
Conclusion
The global economy has been shaken by Trump’s new tariff announcement, leading to a weakening of the Indian rupee against the US dollar and similar setbacks for major currencies in Asia. The tariffs on imports from India and other countries reflect a broader strategy by the US to assert its economic policies. While the immediate impact on the rupee is evident, the longer-term effects could be significant for India’s economy, trade relations, and growth prospects. Traders, investors, and governments alike will be closely monitoring the situation as it evolves, and markets brace for further volatility in the wake of the tariff imposition.
