As global markets react to a sharp escalation in tariffs, investors would do well to avoid simplistic interpretations of the situation. Assumptions such as “tariffs will soon be rolled back” or “India is better positioned than others” can be misleading and financially damaging, say experts.
The recent tariff hikes, especially the 104% levy imposed on Chinese imports by the US, may appear temporary, but even a few weeks of such measures can dent market sentiment. Equity markets, known for reacting swiftly, may not wait for political clarity. History shows that misjudging the consequences of trade conflicts often leads to permanent losses for those who panic.
While India’s own tariff levels and modest export exposure to the US might seem reassuring, analysts caution against narrow readings. “Trade wars are never just bilateral,” warns DSP Mutual Fund. “A 2% direct export share hides the broader threat. If Chinese goods are redirected to other markets like India due to US tariffs, retaliations could follow, triggering a multilateral trade slowdown.”
This broader contagion effect could put India’s 12% export-to-GDP ratio under pressure. The cascading impact on global trade and GDP growth is far more severe than sectoral disruptions.
Investor complacency is another risk. Drawing comparisons with past crises like COVID-19 or the 2008 financial crash can breed a false sense of security. Rather than assuming survival, experts advise focusing on preparation through conservative asset allocation, diversification, and discipline.
So what should investors do now?
Asset managers suggest using hybrid funds such as Dynamic Asset Allocation Funds (DAAF) and Multi Asset Allocation Funds (MAAF) to navigate the uncertainty. These offer a balanced exposure and are suited for rebalancing portfolios when equity allocations are low. Should Indian large-cap stocks fall another 10–15%, valuations may become attractive for long-term investors.
The key, experts stress, is to avoid reactionary decisions. “High activity is the enemy of compounding,” DSP notes. During volatility, emotional capital is just as crucial as financial capital. Taking fewer actions and focusing on long-term goals can help investors remain on course.
While unknowns continue to dominate, the current market environment may also present rare opportunities. Disciplined investors with a multi-asset approach stand to benefit as panic-selling creates bargains across asset classes.
