Moneycontrol Pro Panorama | Waiting for Godot

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Dear Reader,

As the US prepares to impose tariffs on a wider set of trading partners on April 2, the anxiety is palpable among investors in equity markets. US stocks saw their biggest quarterly drop in two years in January-March 2025. Even locally, calendar year to date returns on the Nifty 50 index are trending negative.

There is no way one can accurately predict the US’s new tariffs or even which countries and sectors will be hit hard. Even so, the consensus is clear about the impact of tariffs on the global economy and corporate earnings.

“As far as the market implications of tariffs, the consensus is very clear that it is negative for equities (it will diminish earnings),” explains this story from the Financial Times, free to read for Moneycontrol Pro subscribers.

Still, much remains unclear. Will the US, which does not manufacture all the goods it consumes, impose an extra burden on its consumers by imposing new tariffs on all imports?
Even if tariff moves are driven by the strategic objective of bringing manufacturing back into the US, there are doubts if the country will be able to achieve those goals in all sectors.

The pharma and generic drug industry is a case in point. Generic drug companies are able to supply medicines at the given price to the US due to cost efficiencies in manufacturing locations outside the US. If forced to produce in the US, then manufacturing costs can rise and increase prices.

“Our interaction with companies suggests that they are unlikely to make significant investments in capacities in the US even in the eventuality of high tariffs,” analysts at Nomura said in a note referring to generic drugs.

Additionally, investors should watch out for the secondary impact of current policy changes.

Tariffs and uncertainty over global economic growth are weighing on consumer and business expectations. Key customer segments of the IT services companies are bracing for slower growth this year, as we explained in this story. This is clouding the growth outlook of IT services companies. The NSE IT index is down 2.2 percent in Tuesday afternoon trade.

As the threat of new tariffs push investors to the edge, questions are being raised if America’s new approach to foreign trade will weaken the country. Affected countries are pooling their energies to reduce their dependence on the North American market and counter the US. Read Saibal Dasgupta’s analysis of the geopolitical developments here.

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R Sree Ram
Moneycontrol Pro