The Morning Edge: Global Economy Braces for Impact as US Tariffs Trigger Chain Reaction

Goldman Sachs has sounded the alarm: President Trump’s sweeping tariffs will deliver a "growth shock" to the US economy, forcing the Federal Reserve to slash rates more aggressively than anticipated. "This is going to be a direct hit to US consumers," warned Goldman’s Ashish Shah, as the bank predicts retaliatory measures will amplify the damage worldwide.

The backlash is already erupting globally:
  - EU’s Ursula von der Leyen called the tariffs a "major blow to the world economy" that could "spiral into protectionism.”
  - China vowed "firm countermeasures" to defend its interests.
  - Japan warned of "significant disruptions" to global trade rules.

With markets now pricing in deeper Fed cuts, the stage is set for a high-stakes economic showdown—one that could redefine globalization itself.

Data
The US services sector expanded at its slowest pace in nine months, with the ISM non-manufacturing PMI dropping to 50.8 in March from 53.5 in February—the weakest reading since June 2024—signalling a potential sharp slowdown in Jan-Mar economic growth amid escalating trade tensions. While still above the 50-threshold indicating expansion, the deceleration in the sector which drives over two-thirds of US economic activity reflects growing caution among businesses facing tariff disruptions. Separately, initial jobless claims fell by 6,000 to 219,000, underscoring ongoing labour market resilience. However, risks loom as the Trump administration’s aggressive government downsizing and import duties threaten to destabilize employment and economic momentum.

Markets
Overnight
US stocks suffered their worst single-day decline in years on Thursday as President Trump's sweeping trade measures ignited fears of a full-blown global trade war. The S&P 500 and Dow Jones plummeted after the administration imposed a 10% baseline tariff on most US imports, with targeted rates as high as 54% on Chinese goods—directly hitting Apple, whose supply chain is deeply rooted in China. The selloff ravaged multiple sectors: Nvidia and Amazon led tech's plunge, retailers like Nike and Ralph Lauren collapsed on new tariffs targeting Vietnam, Indonesia and China, while big banks Citigroup, Bank of America, JPMorgan tumbled amid heightened recession fears—triggering a massive flight to safe-haven Treasuries as investors braced for stagflation risks.

US Treasury yield on the benchmark 10-year Treasury notes dived 14.6 basis points to 4.049%—its steepest single-day drop since August 2—after briefly touching 4.004%, the lowest level since November 25. The dramatic move reflects a frenzied flight to safety as investors seek shelter in government bonds amid growing economic uncertainty. With markets bracing for potential economic downturn from escalating trade tensions, demand for stable income has surged, reshaping the interest rate landscape.

The US dollar tumbled across the board on Thursday, hitting six-month lows against the euro and safe-haven currencies as investors fled from Trump's aggressive new tariffs. The euro surged 1.7% to $1.1037—its biggest intraday gain since November 2022—while the yen jumped almost 2% and the Swiss franc rallied 2.4%. The dramatic moves reflect growing market panic that the 10% universal tariffs and targeted hikes up to 54% could derail global trade and economic growth, with traders now pricing in severe economic disruptions ahead.

Brent crude oil prices plummeted 6.4% on Thursday—their worst single-day drop since 2022—as a surprise OPEC+ output hike clashed with fears that Trump’s sweeping tariffs will crush global demand. Brent crude tumbled $70.14 a barrel, down $4.81, or 6.4% after OPEC+ accelerated its production increases, now planning to add 411,000 bpd in May which is triple the initial 135,000 bpd target. 

Day’s Ledger
Economic Data:

• India March HSBC Services PMI
• India Weekly FX Reserve Data
• US March Non-farm Payrolls Data
• US Baker Hughes Oil Rig Count Data

Corporate Actions

• Biocon board to consider fund raising plan
• Housing & Urban Development Corporation board to consider fund raising plan
• Power Grid Corporation of India board to consider fund raising plan
• Hexaware Technologies board to consider dividend

Policy:

• ECB's De Guindos speaks
• US Fed Chairman Powell speaks
• Fed Waller speaks
• US Fed Vice Chair for supervision Barr speaks
• Budget Session of Parliament scheduled to conclude

Tickers

• AU SMALL FINANCE BANK’s gross advances rise 25.8% YoY as of March 31.
• AVENUE SUPERMARTS’s JAN-MAR standalone revenue up 16.7% YoY to ₹144.62 billion.
• BAJAJ AUTO reports March dispatches increase 1% YoY; FY25 sales grow 7%.
• BAJAJ FINANCE’s AUM up 26% YoY to ₹4.17 trillion as of March 31.
• BANK OF BARODA’s global advances up 13% YoY, deposits rise 10.3% as of March 31.
• BANK OF INDIA’s domestic loans grow 14.3% YoY, deposits up 11.2% as of March 31.
• BHEL-HITACHI ENERGY consortium signs contract with Adani Energy unit.
• GLAND PHARMA gets US FDA approval for Acetaminophen injection.
• Govt to divest 2.8% stake in MAZAGON DOCK via OFS; floor price at ₹2,525/share.
• HDFC BANK’s gross advances increase 5.4% YoY to ₹26.44 trillion as of March 31.
• IDBI BANK’s net advances climb 16% YoY, total deposits up 12% as of March 31.
• IDFC FIRST BANK’s loans rise 20.3% YoY, deposits up 25% as of March 31.
• JINDAL STEEL acquires Allied Strips via subsidiary for ₹2.18 billion.
• L&T FINANCE retail loan book grows 19% YoY to ₹951 billion as of March 31.
• PIRAMAL FINANCE secures $265 million via external commercial borrowing.
• POONAWALLA FINCORP AUM jumps 42.2% YoY to ₹355.5 billion as of March 31.
• RBL BANK’s gross advances up 11% YoY, deposits increase 7% as of March 31.
• SAI LIFE SCIENCES opens peptide research centre at Hyderabad campus.
• SBI and CITIGROUP launch $295 million social loan for small farmers.
• ULTRATECH to acquire Wonder Wallcare for up to ₹2.35 billion.
• VEDANTA JAN-MAR aluminium output rises 1% YoY; alumina output falls 11%.

Must Read

• Raghuram Rajan calls Trump's reciprocal tariffs a "self goal", says impact on India will be smaller
• Karnataka plans 5% fee on online platforms Amazon, Flipkart, Ola, Uber to fund gig worker welfare
• India urges Brics to mobilise $1.3 trillion to achieve climate goals
• Parl panel seeks ₹400 daily MGNREGA wage, higher social security pensions
• Infosys files fresh case against Cognizant; accuses IT firm of abusing ‘power of monopoly’
• SEBI exempts govt from open offer in Vodafone Idea deal
• How did the US arrive at its tariff figures?
• CEOs think Trump’s tariff plan is a ‘huge mistake,’ says Altimeter’s Brad Gerstner
• Trump says China could get tariff relief if it approves TikTok deal
• Trump’s $1.6 Trillion Corporate Pledge Parade: What’s Real, What’s Not
• Trump Gives China’s Xi a Chance to Win Over World Hit by Tariffs