US President Trump tariffs push markets down rabbit hole of uncertainty

The current market environment mirrors the turmoil of 2020 during the black-swan event, with markets sinking into panic driven by uncertainty, according to analysts.

 

They suggest that the announcement of tariffs by US President Donald Trump has trapped markets in a bottomless pit for now, forecasting further declines in the near future, though occasional pullbacks are expected. Investors, they recommend, should use market dips as opportunities to buy for the long term but should spread their investments over time. 

Structurally, inflation is set to rise, while growth is expected to slow, said Jyotivardhan Jaipuria, founder and managing director of Valentis Advisors. He believes tariffs have placed the global economy in uncharted territory, stoked by fear of the unknown. 

“Bond markets expect the US Federal Reserve to cut rates as fears of a dwindling economy tied to tariffs grow. Friday’s drop in the US markets was largely driven by China’s retaliatory measures. As things stand, the market’s bottom remains unclear, much like during the pandemic in 2020. Volatility will persist. Investors should avoid lump-sum investments and instead stagger them,” Jaipuria advised. 

US stocks fell for the second consecutive day on Friday after China retaliated to President Trump’s reciprocal tariff announcement, imposing a 34 per cent tariff on US imports. 

The Nasdaq Composite dropped 5.8 per cent to 15,588, officially entering bear market territory (down 22 per cent from its December 2024 peak), while the Dow Jones Industrial Average plunged by 2,231 points, or 5.5 per cent, to 38,314.86 — its largest single-day drop since June 2020. The S&P 500 also fell 5.97 per cent to 5,074.  Besides markets, analysts cautioned that tariff impositions, supply-chain disruptions, and the global growth slowdown would also impair corporate earnings.

 

“Overall, earnings growth is expected to slow, with Nifty earnings per share likely to face a further 3-4 per cent cut in 2025-26, reducing it below our previous growth forecast of 12 per cent. Sectors such as defence, electronic manufacturing, real estate, utilities, and power may experience minimal impact,” said Jitendra Gohil, chief investment strategist at Kotak Alternate Asset Managers. 

While the tariff imposition marks a critical moment for the world economy and markets, analysts observed that the future hinges on how China, India, Russia, and other emerging markets coordinate to weather this onslaught. 

“I believe that over the next two or three years, India will emerge much stronger. In the short term, however, we should brace for another 10 per cent correction, which is my personal outlook,” Gohil said. 

Technically, the Nifty has broken all major price and moving average supports, indicating further downside potential. 

“The immediate support lies at 22,600, while a decisive breach could open the door to 22,100. On the upside, any recovery would likely face stiff resistance in the 23,100–23,400 zone,” said Ajit Mishra, senior vice-president of research at Religare Broking.