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Mr. Trump bites the bullet on tariffs, and every country is impacted in the crossfire

A list of ~60 countries were singled out for a significant increase in reciprocal tariffs ranging from 10% to 50%. To conceptualise reciprocal tariffs, the tariff rates that would drive bilateral trade deficits to zero were computed. China was slapped with a 34% tariff over an above existing tariff, making it amongst the worst hit, with the EU scraping through with a 20% levy. No country emerged unscathed with a blanket 10% tariff on all.

US policy shifts: growth risks & global impact

The US seeks to curb its trade deficit and improve fiscal health with reciprocal tariffs, but abrupt disruptions could dampen growth and investment, amidst rising uncertainty. Impact on inflation would be watched with tariff effects offset by weaker commodity prices and slowing consumption. With fiscal restraint, subdued investment, and fading consumption momentum, economic headwinds are mounting, reinforcing concerns of prolonged stagnation and slower global growth.

Is the USD losing its grip as global trade disrupted?

The US Dollar Index (DXY) sliding from 110 to 101.7 marks a pivotal shift in global currency trends, aligning with emerging economies’ de-dollarisation push. A weaker USD hints at fading demand for American assets, fuelled by geopolitical shifts and reserve diversification. Is this the beginning of the end for the USD’s dominance, or just another cycle of volatility with financial risks ahead? The world is watching…

Amid trade chaos, India holds its ground on external front

While India’s lower trade-to-GDP ratio offers some insulation, supply chain disruptions may still impact investment and trade financing. FDI inflows remain uncertain, adding to near-term volatility. High tariffs are now a reality, but India’s 26% rate remains lower than key competitors in solar modules, electronics, and textiles etc., providing a relative advantage. How this plays out for investment and competitiveness remains to be seen…

Can India’s service sector dodge the trade war fallout?

The Indian IT sector and GCC growth might face pressure as global economic deceleration threatens to curb demand for outsourced services. With AI adoption and growing concerns over immigration policies, the sector could face sluggish hiring. A slowdown in IT and GCC sectors could weaken discretionary spending and dampen real estate demand

RBI’s evolving playbook: currency & liquidity reversal

The currency and liquidity landscape has shifted sharply. INR has strengthened from ~87.5 to ~85.1 against the USD, supported by a softening DXY, favourable USD-INR swap dynamics, and weaker crude prices. These factors have eased risks, allowing the RBI to unwind massive forward positions in gradual manner. Liquidity, in deficit for much of Q1CY25, flipped to surplus in Apr’25, driven by large RBI interventions through VRR, OMO, and a surge in government spending in late Mar’25. This sharp reversal eased funding pressures, pulling short-end rates lower, with T-bill yields and TREPS rate below the repo rate and the 10Y Union G-sec benchmark hovering ~6.50%.

RBI & currency volatility: the twin forces shaping yield outlook

The decline in 10Y Union G-sec bond yields to ~6.50% reflects easing rate expectations, supported by surplus banking system liquidity, which has driven a sharp drop in short-term yields. With inflation moderating and growth risks persisting, the RBI is likely to cut rates by 25bps in the upcoming policy meeting. However, the broader outlook remains sensitive to currency volatility and the RBI’s participation through OMOs. Given the higher risk premium, credit spreads—especially for AA-rated and below bonds—may widen slightly compared to last year as investors demand higher risk premia