In a surprising move that sent ripples through global markets, US President Donald Trump announced a 90-day suspension on certain tariffs, providing temporary relief to traders and investors worldwide, including India. While the US tariff pause excludes China, which now faces increased tariffs of 145%, the decision has sparked positive sentiment across international markets and could potentially trigger a short-term rally in Indian equities.
Understanding the US Tariff Pause and its Global Context
President Trump’s decision to temporarily ease trade relations between the United States and several countries comes at a crucial time for the global economy. The announcement followed a period of intense market volatility, with Wall Street experiencing some of its most turbulent sessions after the early days of the COVID-19 pandemic.
The 90-day US tariff pause applies to higher-band tariffs for 59 territories, though a 10% baseline tariff remains in place for all countries, including India. This new minimum rate represents a significant shift in America’s trading relationships globally.
For Indian markets, which remained closed on Thursday (April 10, 2025) for Mahavir Jayanti, this development led to a strong gap-up opening with Sensex soaring over 1244 points and the Nifty 50 climbing more than 400 points. If we check the other Asian markets, Japan’s Nikkei jumped over 2,000 points and Taiwan’s weighted index surged 9.2%.
Immediate Global Market Impact on India
The immediate reaction to Trump’s announcement has been overwhelmingly positive across international markets. On Wall Street, the Nasdaq soared 12.16%, while the S&P 500 jumped 9.52% and the Dow Jones gained 7.87%. European markets also responded favourably, with indices rising to 6%.
For India, this news comes alongside other positive domestic developments:
- The Reserve Bank of India recently announced a 25 basis points rate cut
- Inflation projections for the current financial year have been trimmed to 4%
- Normal monsoon forecasts for 2025 have further brightened the economic outlook
While the RBI has slightly reduced GDP growth projections for FY26 to 6.5% (down from 6.7%), citing global trade and policy uncertainties, the overall macroeconomic picture remains relatively stable compared to many other economies.
Benefits for Indian Exports and Key Sectors
The 90-day pause in higher tariffs represents a significant reprieve for several sectors of the Indian economy that rely heavily on exports to the United States. In particular, Indian exports of shrimp and other seafood products have received temporary economic relief after facing the prospect of a 26% tariff.
“The decision to halt further tariffs is especially a relief for Indian shrimp exporters,” noted a government official when talking to Reuters, referring to an industry that had faced a tariff disadvantage compared to competitors like Ecuador.
Other key sectors that stand to benefit include:
- Electronics products (worth nearly $14 billion in exports)
- Gems and jewellery (over $9 billion in exports)
- Pharmaceuticals
- Textiles and garments
This reprieve allows these industries to maintain their competitiveness in the American market, at least for the next three months.
Accelerating Trade Relations Between India and the US
The US tariff pause comes at an opportune time, as India and the United States are already working on a comprehensive trade deal. During a meeting held between President Trump and Prime Minister Narendra Modi in February, the two nations agreed to fast-track negotiations on the first phase of a trade agreement to be concluded by the end of 2025.
“India is one of the first nations to start talks over a trade deal with the United States and to have jointly agreed to a deadline to conclude it,” said a government official who spoke to Reuters on condition of anonymity.
The 90-day pause provides Indian negotiators with additional time to work towards finalising this bilateral trade deal, potentially strengthening trade relations between the two countries in the longer term.
Economic Relief and Future Outlook
While the tariff suspension offers economic relief to Indian businesses and markets, it’s important to note that this is a temporary measure. The continuation of the baseline 10% tariff on all countries, including India, still represents a shift from previous trading conditions.
For the Indian economy, however, the global market impact of these tariffs may be relatively contained. As Crisil noted, “For India, merchandise exports to the US accounted for only 2-2.5% of the gross domestic product (GDP) in the three years through FY2024.”
Additionally, strong balance sheets in export-oriented sectors may provide a cushion to credit profiles during this period of volatile global trade environment, offering some protection against potential future disruptions.
Investor Sentiment and Market Strategies
The US tariff pause has undoubtedly improved investor sentiment globally. However, investors should remain cautious. The Indian Rupee strengthened against the US Dollar following the announcement, rising 51 paise to 86.17 in early trade on the back of a strong equity market opening, a weakening greenback, and declining oil prices. While this is positive news for importers, it may partially offset gains for export-oriented businesses.
Furthermore, as evidenced by the subsequent market pullback in the US on Thursday (with the Dow Jones falling 2.5% after its initial 8% surge), volatility remains a concern. The uncertainty over what will ultimately happen with tariffs after the 90-day period continues to create unpredictability in global markets.
Final Thoughts: Navigating Uncertain Waters
President Trump’s 90-day tariff pause represents a significant but temporary reprieve for global markets, including India. The suspension has opened a window for Indian companies to rework their plans, and for Indian negotiators to make headway on a bilateral trade deal with the United States.
While the market reaction is positive, long-term and fundamental investors must note that uncertainty on global trade policy will remain. The 90-day lifeline is welcome breathing space, but the underlying factors that sparked the trade tensions have not gone away, especially when it comes to US relations with China.
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