The Trump administration announced tariff rates for its trading partners and sent shockwaves through the global financial system. Tariff fees threatened to disrupt established global trade flows and supply chains.
However, the market sighed for relief Wednesday as Trump announced a 90-day suspension of tariffs in all countries except China. The reason for the 90-day suspension could have been a disruption in the bond and stock markets.
After mutual tariffs were announced, trading partners had two options. They either approach the Trump administration for negotiations or resort to retaliation measures.
China chose to choose the latter option and was penalized for additional tariffs. The Trump administration’s intentions seem clear. They hope to have trade contracts, quick victory and uniform terms of trade.
In the process, there is the risk of compromising the advantages and exceptionalism that the United States has enjoyed for decades. Countries may depend on the United States as guardians of the world’s geopolitical order, or may be considered trustworthy trading partners or defence ally. Most countries must cut off bilateral deals with the US in order for the most preferred country (MFN) agreement clause (MFN) clause to prevent kicking. The US economy cannot efficiently produce all of its goods to Indigenous peoples. Therefore, it is difficult to adjust the supply curve in the short term. Even over the long term, indigenous production is inefficient, resulting in the loss of death.
Therefore, in the short term, prices for essential products (food and clothing) can be higher, and as consumers streamline their spending budgets, discretionary spending such as consumer durables could be reduced. Therefore, it can be difficult to predict the impact on inflation. It is important to track US Bleak Ben, or inflation expectations
In the long run, we could see trends like decooperative development occurring. Central banks are looking to diversify their reserve holdings worldwide. Demand for the US Treasury could collapse. Countries will try to attack more bilateral or concentrated regional trade transactions.
Also important to track are high yield spreads and CD spreads. These are to provide early warning signs of a recession or slowdown. Certain countries with relatively low tariff rates can see an increase in export share to the US.
Global freight rate trends across major delivery routes provide important clues. Countries also need to protect their domestic economies from dumping due to the production of major powers. They need to set their own trade barriers or underestimate their currency.
As far as India is concerned, our tariff rate is relatively low, which helps us increase our export share. Diplomatic relations with the US are also in good spirits. The RBI needs to manage your currency wisely, as Rupee is not too reinforced in a relative perspective to avoid dumping and is not too weak to board the US Treasury currency manipulation watchlist.
Despite the recent decision by the Trump administration to put a 90-day suspension (except China), we believe the country is cautious and safeguards.
Diplomats work overtime to negotiate and/or strategize and plan safeguards by planning their own tariffs, Forex management strategies, and more. Meanwhile, markets and risk sentiments continue to follow Yo-Yo.
(The author is IFA Global, Founder and CEO)
(Disclaimer: The recommendations, suggestions, opinions and opinions given by experts are unique. (These do not represent views of the economic era)
