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U.S. Trade Representative Jamieson Greer informed the Senate Finance Committee that President Trump's aggressive tariff strategy has led to negotiations with approximately 50 countries aiming to lower their trade barriers. This comes amidst market fluctuations and criticism from business leaders following Trump's announcement of widespread tariffs. Despite some market recovery on hopes of tariff adjustments, there's considerable unease among lawmakers about the lack of a coherent plan behind these tariffs. Senators from both parties have voiced concerns, with some like Sen. Thom Tillis questioning the administration's strategy and others like Sen. Ron Wyden criticizing the chaotic approach to trade policy. There's a pushback against the executive's broad use of tariff powers, with legislation proposed to require Congressional approval for new tariffs, highlighting a tension between the branches of government over trade authority. However, Senate Majority Leader John Thune indicated reluctance to bring such legislation to a vote, suggesting continued executive dominance in trade policy.
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Indian stocks experienced a significant rebound, with the NSE Nifty 50 Index surpassing its previous levels after a long weekend, erasing losses triggered by US President Donald Trump's reciprocal tariffs. This recovery positions India as the first major equity market to bounce back from the tariff-induced downturn. Investors are increasingly viewing India as a safe haven due to its strong domestic economy and its potential to better withstand a global recession compared to other nations facing higher tariffs. Amidst the intensifying trade war between the US and China, India's conciliatory stance and efforts to negotiate a trade deal with the US highlight its attractiveness as an alternative manufacturing base. Despite a recent selloff due to concerns over economic growth, high valuations, and foreign fund exodus, optimism is fueled by lower valuations, expected interest rate cuts, and falling crude oil prices, which are significant for India as a major importer.
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President Trump's economic strategy of imposing high tariffs while expecting low interest rates has led to a significant market reaction, pushing interest rates up. Before the escalation of tariffs, the U.S. economy was poised for a "soft landing," with inflation nearing the Federal Reserve's target and growth remaining stable. However, Trump's tariff policies, particularly the increase to 145% on Chinese imports, have disrupted this balance, causing inflation fears and a subsequent rise in interest rates. This situation has left Trump with a choice: accept higher rates, repeal tariffs, or attempt to manipulate rates through unconventional means. The latter could involve altering the Treasury's bond issuance strategy or even replacing the Federal Reserve Chair, actions that could further unsettle markets. The irony lies in the fact that without the trade war, Trump might have achieved his desired low rates, highlighting the self-inflicted economic challenges his policies have created.
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The Trump administration has launched trade probes into the importation of semiconductors and pharmaceuticals, signaling potential new tariffs that could expand the U.S. trade war. These investigations, announced in the Federal Register, are examining the national security implications of these imports under Section 232 of the Trade Expansion Act. The probes could last for months, with outcomes expected within 270 days, though they might conclude sooner. The semiconductor industry, already strained by global supply chain issues post-Covid, faces further disruption, potentially affecting tech giants like Apple and Nvidia. Similarly, the pharmaceutical sector, with companies like Eli Lilly and Merck, might see increased costs, which could lead to higher drug prices or reduced research and development. The moves come after a brief exemption from tariffs for certain tech products, but the administration has indicated that this relief is temporary. The investigations could have significant implications for global trade, domestic manufacturing, and consumer prices in the U.S.
