Markets set for a positive start as Trump pauses tariffs on Canada, Mexico

Indian benchmarks had come under pressure in the last session, worried over Trump's aggressive tariff plans.

The Indian equity market is set to start the session on February 4 on a positive footing, tracking gains across global markets that cheered for Donald Trump's decision to pause tariffs on Canada and Mexico, while opening doors to initiate talks with China.

As of 7.20 am, GIFT Nifty futures were trading at 23,537.5, up 123.50 points or 0.53 percent, hinting a start in the green for the session ahead. This comes after futures tied to Wall Street indices inched higher early Tuesday. Wall Street indices had ended the session overnight sharply off their day's lows, but still recorded minor cuts.

Markets across Asia-Pacific also started the session on Tuesday on an upbeat note, with Japan's Nikkei 225, Hong Kong's Hang Seng and South Korea's Kospi surging 1-2 percent.

Late Monday night, US President Donald Trump announced a 30-day delay on proposed tariffs for Canadian and Mexican import after holding discussions with leaders of both nations. The postponement follows commitments from Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum to strengthen border security with the US. Despite the delay, analysts at Nomura believe the the likelihood of tariffs on Mexico and Canada is higher than it was previously.

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Over the weekend, the Trump administration levied a 25 percent import tariff on all Mexican imports and most Canadian goods, with a 10 percent exemption for energy products. Meanwhile, a 10 percent tariff on Chinese goods remains under review.

With tariffs on Canada and Mexico temporarily paused, attention now turns to China. Trump stated that his administration plans to engage in talks with Chinese officials, leaving room for a possible reprieve on the 10 percent tariff set to take effect within hours. If no agreement is reached by Tuesday midnight (New York time), the tariffs on Chinese imports will be enforced as planned.

Trump's hardline stance on tariffs, against expectations of a much measured approach had sparked fears of disruption in the global economy, with many fearing the possibility a multi-nation trade war. Although, a the delays in tariffs has given some relief to investors, concerns still loom large. While the delay in tariffs has offered some relief to investors, uncertainty around its future impact on global trade continues to loom large.

"While tariffs may boost short-term fiscal positions, they might risk higher inflation, contrasting with Trump's desire for lower interest rates. Investors should recall that 2018's volatility created buying opportunities. As history often rhymes, the rest of the year may present similar scenarios, warranting vigilance for potential investment openings amid economic and political developments," said Arindam Mandal, Head of Global Equities at Marcellus Investment Managers.

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