Trump tariff, stock market today: Nomura still sees potential for US-China truce

Asian markets were jittery, falling up to 2 per cent in Monday’s trade. However, GIFT Nifty traded higher, suggesting investors may be viewing China’s weakness as India’s opportunity, even as foreign outflows from Indian equities continue unabated.

Global sentiment turned cautious after US President Donald Trump announced 100 per cent tariffs on Chinese goods starting November 1. He later softened his stance, remarking that “the highly respected President Xi just had a bad moment,” and adding that neither he nor Xi wanted to see a recession in their respective countries.

“US-China tensions have flared yet again, and we think this will come as a negative surprise for markets, especially against the background of stretched equity valuations and positioning. US-China tensions potentially escalating has been one of the key risks that we have been consistently flagging for our overall otherwise constructive stance on Asia-ex-Japan, HK/China stocks and indeed global risk sentiment,” Nomura said. 

On Thursday, October, Beijing announced a comprehensive set of export controls on rare earths – including some critical inputs for EVs, defense and high-tech industries. Some measures are expected to come into force on November 8 while some more restrictive measures later by December 1.

Nomura said Trump’s 100 per cent tariff announcement on all Chinese goods, was in response to the raft of recent reprisals and offensives from Beijing, including new restrictions on rare earth mineral exports and associated processing technologies, port fees on ships linked to the US, an investigation into Qualcomm, and an import ban on US soybeans and some Nvidia AI chips. 

“This reescalation of tensions demonstrates that, despite months of tariff ceasefires and frequent discussions, the relationship between the world’s two largest economies remains prone to sudden escalations, supporting our view that continued economic/trade clashes between the two superpowers are inevitable,” it said.

That said, Nomura still sees potential for a truce after renewed US-China tensions. 

“We continue to expect two more rate cuts this year, but a growing contingent of officials appears uncomfortable with additional easing amid high inflation. US-China trade tensions appear to be re-escalating. President Trump has threatened to cancel a meeting with President Xi in two weeks and is considering raising tariff rates in response to China tightening export restrictions on rare earth minerals. Data remain light due to the ongoing government shutdown. One exception is September CPI, which is now scheduled for release on 24 October. Second-tier indicators released this week continue to signal a modest slowdown in growth and employment. Fedspeak remains divided,” Nomura said in a different note.