Sensex drops over 3.5%, Nifty falls 1,000 points amid trade war fears

US President Donald Trump's tariffs have created turmoil across global markets, erasing trillions of dollars in value and causing a sharp downturn in the Indian equity markets.

The Sensex, a benchmark index for Indian stocks, opened nearly 4,000 points lower, losing over 3.5% of its value since the last trading session.

Similarly, the Nifty index saw a dramatic drop, losing over 1,000 points in early trade. This steep fall follows a broad sell-off in Asian markets, spooked by Trump's aggressive trade policies, with US futures indicating further losses when trading resumes in the evening.

The tariffs, which Trump has positioned as the key to a "golden period" for US industries, are intended to overhaul trade practices that he perceives as unfair.

These tariffs are targeted at specific countries, with rates as high as 50%. For India, the tariff rate is set at 26%, in addition to a 10% baseline duty imposed on all nations.

This has triggered widespread anxiety among exporters and traders in India, who fear the long-term consequences of such policies.

Despite the market chaos, President Trump remained defiant, insisting that the tariffs were necessary to "fix something,” saying he likened the tariffs to a type of medicine required for resolving deep-rooted economic issues.

The market response was immediate and dramatic. The Sensex plunged by 3,939.68 points to 71,425.01 in the early hours of trading, following the weekend break.

By 10 am, it was down over 2,700 points. Similarly, Nifty fell by 1,160.8 points to 21,743.65. The Indian rupee also weakened against the US dollar, opening 30 paise lower at 85.74.

Analysts have expressed concern over the broader economic fallout, particularly for emerging markets like India.

Ajay Bagga, a market expert, warned that India’s economy could suffer, not due to internal issues, but because of its interconnection with global economic trends.

"India will face the heat, not due to domestic reasons, but as an interlinked chain in the global portfolio flows. India will need a fiscal, monetary, and reform package to protect the domestic economy from this global economic winter that is threatening to settle in," Bagga said.

Sunil Gurjar, a SEBI-registered research analyst, observed that Nifty50 had breached its first support level and was nearing the second. If the downward momentum continued, it could lead to even more significant losses.

The global impact of Trump’s tariffs was evident as well. Asian markets, which were the first to react, bore the brunt of the fallout.

Chinese stocks plunged by over 4%, while the Hang Seng index in Hong Kong dropped more than 10%. Japan’s Nikkei 225 fell by at least 6.5% after a more than 8% decline in early trading.

Other markets in Taiwan and Singapore also suffered steep losses, with Taiwan's main index collapsing nearly 10% and Singapore’s over 8%.

US markets were not immune either. Futures contracts indicated further significant losses, with the S&P 500 futures down by 4.2%, Dow Jones Industrial Average futures declining by 3.5%, and Nasdaq futures losing 5.3%.

This suggested that Wall Street was likely to experience substantial losses once it reopened. Oil prices were also negatively affected, with US benchmark crude dropping 4% and Brent crude following suit.

The rapid sell-off and ensuing fears of a global recession have added to the anxiety in the markets.

Stephen Innes of SPI Asset Management expressed concerns about a potential global recession, saying, "The market is in free-fall mode again, punching through floors. Trump’s team isn’t blinking. The tariffs are being treated as a victory lap, not a bargaining chip."

The ripple effect extended beyond stocks to other markets, including oil. US benchmark crude was down by $2.50, trading at $59.49 per barrel, while Brent crude slid $2.25 to $63.33. These declines marked the lowest level for crude oil since 2021.

The situation in the US was equally grim. On April 4, Wall Street experienced its worst downturn since the COVID-19 crisis, with the Dow Jones Industrial Average plummeting by 2,231 points, or 5.5%. The S&P 500 lost 6%, and the Nasdaq Composite declined by nearly 6%.

Stocks in the S&P 500 index saw losses across the board, with only 14 companies closing higher. The sell-off deepened after China retaliated against Trump's tariffs by imposing its own 34% tariffs on US imports, starting on April 10.

This marked a significant escalation in the trade war between the world’s two largest economies, with many analysts warning that it could lead to a full-blown global recession.

Trump, however, remained steadfast in his approach, framing the tariffs as a necessary measure to address trade imbalances.

"I spoke to many leaders, European, Asian, from all over the world. They’re dying to make a deal. And I said, we’re not going to have deficits with your country. We’re not going to do that, because to me a deficit is a loss. We’re going to have surpluses or, at worst, be breaking even," Trump said.

As the world faces the fallout from these sweeping tariffs, fears of inflation and economic stagnation are growing.

Jerome Powell, the Chair of the Federal Reserve, warned that the tariffs could contribute to inflationary pressures.

"Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem," Powell said.

The world now watches closely to see how the situation unfolds and whether Trump’s bold tariffs will indeed bring the intended economic overhaul or plunge the global economy into further turmoil.