Markets On Standby As Tariff Bombs Start Dropping
The global markets are turning and the markets no longer feel the Trump administration is good for the markets, at least in the near term
On Episode 523 of The Core Report, financial journalist Govindraj Ethiraj talks to Dr Arunabha Ghosh, CEO, Council on Energy, Environment and Water (CEEW).
(00:00) Stories of the Day
(01:00) Markets on standby as tariff bombs start dropping
(03:12) Oil prices are sliding down now even as gold prices look up
(04:27) Trump friendly WSJ calls tariffs the dumbest move for whacking friends not adversaries
(06:17) Warren Buffet says Trump moves against Canada and Mexico are act of war
(09:03) Amazon to invest in data centre in India
(10:17) How ready is India for extreme temperatures in March?
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Wednesday, the 5th of March and this is Govind Rajathiraj, headquartered in Broadcasting and Streaming, as always, from Mumbai, India's financial capital. The top stories and themes for the day.
The stock markets are on standby as the tariff bombs now start dropping.
Oil prices are sliding down, thanks to those tariff bombs, even as gold prices start looking up.
The Trump-friendly Wall Street Journal calls the tariffs the dumbest move for whacking friends and not adversaries.
Warren Buffet says Trump moves against Canada and Mexico are an act of war.
Amazon to step up data centre investments in India.
And our climate section, how ready is India for extreme temperatures in March?
The Markets Are Waiting With Bated Breath
The global markets are turning and the stock markets no longer feel the Trump administration is good for them, at least in the near term. In the long term, who knows? The concerns have shifted from just the impact of tariffs to the mounting uncertainty, which has obviously been messing with businesses and their leadership for several months, actually almost three months now.
Businesses don't like uncertainty in taxes, which obviously includes tariffs. The uncertainty and the back and forth is causing more damage to businesses than the tariffs themselves. Now, this actually has been one of the biggest bugbears of most direct and portfolio investors who come to India, who complain about lack of consistency in policy.
And of course, this is a stark contrast that the biggest contributor and creator of business uncertainty right now is the United States. Back home, the nifty 50 has now clocked its longest falling streak in its 30 year history on Tuesday as investors, as we said, are now standing by. More on that and the retaliatory responses shortly.
So the nifty has now fallen about 4% in 10 sessions, which also gives you a sense of the sheer selling pressure in recent weeks and 16% from its record high hit in September. There are sectoral variations in behaviour even now, but it usually goes one way or the other or one counterbalances the other. For example, while there was a possibility markets could have done better on Tuesday, IT and auto stocks pulled the market down as opposed to sectors like financials, which did well, but not well enough.
The 30 stock Sensex was down 96 points at 72,989, while the nifty 50 was down 36 points at 22,082. The relatively good news, of course, was that the broader markets were up with the nifty small cap 100 and nifty mid cap 100 going up by about 0.7 and slightly above or rather closer to 0.1% for the nifty mid cap 100. Now there is some focus on the 22,000 mark for the nifty and the 73,000 mark for the Sensex.
On Tuesday, the nifty did hold above the 22,000 mark as we've mentioned, but the Sensex has fallen below 73,000. Indian markets were also tracking the rest of Asia on Tuesday, which were influenced by, among other things, the close to 9% fall in AI major Nvidia stock on Monday night on Wall Street.
Gold Prices Are Up
Gold prices are now climbing in India as well. Now back over the 86,000 rupee per 10 gram mark on commodity exchange MCX in intraday trade on Tuesday. MCX gold for April 4 contract, according to reports, is only slightly below its all-time high of 86,592 for 10 grams.
Gold analysts that we've been speaking to at the core have been consistently saying that gold is a good buy in the medium term and of course the long term.
Oil Prices Are Down
Here's good news for major oil importers like India, at least for now.
Crude oil prices have fallen following reports that the Organisation of Petroleum Exporting Countries Plus will proceed with a planned output increase in April, according to Reuters. Brent futures were down to about $70.70 under $71 on Tuesday. Analysts told Reuters the current downward trend in oil prices was primarily driven by OPEC Plus's decision to increase output and of course the introduction of US tariffs.
The OPEC and allies like Russia, which makes it the OPEC Plus, decided on Monday to proceed with the planned April oil output increase of 138,000 barrels a day, and this is the group's first such move since 2022, according to Reuters.
The Trump Administration's Dumbest Move
The Trump administration-friendly Wall Street Journal yesterday heaped insult upon injury by saying it understated the point when it called the Mexico and Canada tariffs which have now kicked in the dumbest in history. Mr Trump is whacking friends and not adversaries. His taxes will hit every cross-border transaction and the North American vehicle market is so interconnected that some cars cross a border as many as eight times as they're assembled, said the Wall Street Journal, which is of course an interesting point to note for someone trying to understand supply chain dynamics anywhere in the world.
The Wall Street Journal and others have also quoted an analysis by the Anderson Economic Group which said that the 25% tariff hike will raise the cost of a full-sized SUV assembled in North America by $9,000 to $8,000 for a pickup truck. There are other estimates which say prices of vehicles could go up by $12,000 depending upon the kind of vehicle and its size, and with all of this of course inflation would go up and slow down the economy which of course could affect demand. Investors are trying to read this uncertainty as they also watch growing evidence of a slowing economy in the US, the Wall Street Journal said.
Meanwhile, legendary investor Warren Buffett compared the planned tariffs on Canada and Mexico to an act of war. The legendary investor behind Berkshire Hathaway, which has significant investments in railroads, insurance, energy, retail, manufacturing and so on, spoke during an interview that he gave to CBS News which was picked up by various news organisations including CNN. There he said that actually we've had a lot of experience with them, that's tariffs, and over time there is tax on goods.
I mean the tooth fairy doesn't pay him, he said with a laugh. And then what? You always have to ask that question in economics, you always say and then what?
This was Warren Buffett.
China And Canada Retaliate
China has said it will slap fresh duties on American food and agricultural products including chicken and cotton after the US doubled tariffs on all Chinese exports. On Tuesday, Bloomberg reported also saying that soybeans, beef and fruits are amongst the products facing a 10% tariff according to an announcement by the Ministry of Finance reported by them. Analysts said these measures are still relatively measured for now.
Meanwhile, after the US put those 25% tariffs on all imports from Canada and Mexico and slapped that 10% on China except energy where Canadian energy products are only being charged at 10%. So China and Canada have reacted. Canada has now said that the first tranche of tariffs would come in shortly after US levies targeting about $20 billion in US goods.
According to Bloomberg, China's actions include up to 15% tariff on a range of agricultural goods, adding 10 US entities to a blacklist and banning genome sequencing firm Illumina from selling its China. At a briefing on Tuesday, China's foreign ministry officials reiterated that the US should engage in talks with China on the ground of mutual respect. They said that US farmers will be upset that one of their key markets is adding these tariffs but other industries haven't been hit by wide-scale tariffs at least not yet according to Bloomberg.
Container Trade Is On The Edge
Meanwhile, the global ocean shipping industry that handles 80% of world trade is in stormy waters as these tariffs kick in. The Drury World Containers Index spot rate for a 40-foot container was holding at about $2,629 as of Thursday which by the way just to put things in context is 75% below the pandemic peak of $10,377 in September 21 and the lowest since May 2024 according to Bloomberg which also quoted a Jefferies analyst note saying the geopolitical landscape has of course become more complex which could lead to wild swings for freight trades in either direction but our base case or rather their base case is for a moderation throughout 2025. In an earlier panic-inducing move the US trade representative on February 21st proposed hefty fees on Chinese built vessels entering US ports under a union supported plan to push US shipbuilding according to Reuters.
Under that proposal the vessel owned by Chinese maritime transport operators including the government-owned Costco would pay a port entrance fee of a million dollars per vessel. The fee for other operators using Chinese-built ships could top out at 1.5 million dollars.
Amazon Steps Up
Even as the tariff wars begin and get into full gear American companies are doing what they do best which is find new markets for growth and expansion. Amazon's cloud service provider that Amazon Web Services has said it will invest about 8 billion dollars in Maharashtra state over the next few years. Reuters quoted government officials saying according to a report by International Data Corporation India's cloud services market which is or rather was estimated at about 8.3 billion dollars in 23 is expected to cross 24 billion dollars by 2028 which is exactly in three years time. Some 50 percent of India's data centre capacity is right here in and around the city of Mumbai. India's electronics minister said that along with the investment there will be significant growth in employment and the investments would roll out between 29 and 30. Amazon will also deploy its own graphics processing units latest technologies and cloud management services in India.
The minister said Amazon already runs two data centres on the Indian subcontinent one in Mumbai launched in 2016 and another in Hyderabad which started in 2022 according to that Reuters report.
Warm Weather Ahead
Climate and link conditions will affect our lives in more ways than one in coming months and it's only fair that since lives and livelihoods and thus businesses are going to be affected we spend some time on this issue. India is set to see hotter weather in coming months after recording the second warmest February in more than a century raising the risk of water shortages, crop damages and strain on the electricity and power networks. More parts of the country are likely to see more days of heat waves than usual during the three months ending May 31st officials at the India meteorological department told media last week and quoted by Reuters an early onset of summer is already raising concerns over the wheat crop among others as we discussed earlier on the core report.
In 2022 the hottest march in more than 100 years hit production and forced the government to curb exports and rising temperatures will obviously also boost consumption of coal and essentially lead to a major energy management challenge and situation. I reached out to Dr. Arunabh Ghosh, CEO of the council on energy, environment and water and I began by asking him how we could be better prepared for these rising temperatures, including from a policy perspective.
INTERVIEW TRANSCRIPT
Dr Arunabha Ghosh: Last year at a global scale we breached the 1.5 degree but India itself there were actual recorded heat waves in 2024 or five times more than the normal in India actual recorded heat wave days normally the warnings are given for you know three four days at a stretch it extended to about 20 days we've already in 2025 February has been the hottest and one of the driest month in India in the last 125 years in Maharashtra where you are based in Mumbai they even in Thane I think the first heat wave of 2025 occurred in February itself Mumbai the maximum temperature crossed over 38 degrees 38.7 degrees so this is now occurring and this is getting worse because of climate the heat waves in 2022 in India were 30 times more likely because of climate change so what do we do first we have to understand that we are predictive modelling has to keep getting better the Indian metallurgical department has been investing in this there is now newly developed what is called a multi-model ensemble based on which the forecasting has been done that has to then combine with what we at CEW call the hyper local assessment of heat and humidity so this has to be at a neighbourhood by neighbourhood level so for instance in the same city if you have a much more built-up area versus a greener area felt heat will be different if it is an area where there's a lot more outdoor activities such as construction the impact of public health will be different from where it might be central business district where many workers will be indoors in office buildings so the same heat has different implications so this neighbourhood by neighbourhood hyper local mapping of the heat stress helps to then design the heat cum humidity action plans in addition to that what we have to understand is that urban areas in India are already warming faster than the rest of the country precisely because of not just the climate induced heat but what is called the urban heat island effect so we have to seriously start thinking about city design including green cover including water bodies etc that help to absorb the heat better once you've got these basic benchmarks and baselines established then we have to save lives save livelihoods and look at the broader ambient ecosystem so for saving lives we need to invest in the early warning based on that hyper local mapping as well as the predictive analytics but especially for the poor and the vulnerable those working outdoors we need to build cooling shelters in that very kind of evidence-based way which are the parts in the city etc that this is needed on top of that we have to also think about the cooling solutions that we are providing in low-cost housing not everybody is going to be able to afford an air conditioner so how do we ensure that the financial instruments that are there to lower the upfront cost of say higher efficiency brushless desealing fans etc or passive cooling solutions all this is designed into the low-cost housing that is being developed and finally we will have to also think of micro insurance schemes to support workers who are going to lose income when it becomes too hot to work outdoors for at least certain number of hours in the day if not for the entire day as a whole so heat is not just again an environmental impact of climate change it then has economic impact in terms of the hours your workers can work and it has equity impacts in terms of those who are living in more exposed areas undertaking more exposed work or do not have the resources to support themselves when they lose income as a result.
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Dr. Ghosh also recently authored a piece in the Hindustan Times where he put out an action plan for combating air pollution in New Delhi the capital. Of course air pollution is not such a blazing issue right now and maybe blazing is the right word because in summer times air quality improves and usually and perhaps often that causes people to slack and not much is done leading to a situation where it's winter once again and pollution starts rising now there is a fair emphasis in that report on reducing vehicular traffic and also creating disincentives for people to own cars like reducing the amount of parking spaces. Now Delhi's problems and battles with air pollution are well documented. My question to Dr. Ghosh as we step into this relative period of calm was what should other cities in India do in order to prepare themselves for this fight against air pollution including cities like Mumbai which saw pollution levels matching and even crossing Delhi on some days last year and that was perhaps the first time ever.
INTERVIEW TRANSCRIPT
Dr Arunabha Ghosh: I think the first thing we have to understand is that air pollution is a sort of multi-hydra or rather hydra-headed problem with multiple sources and the sources vary from city to city but the basic composition of the sources is pretty much the same. There's transport emissions, there's dust or construction dust or also road dust, there's industrial pollution, there's the burning of municipal solid waste, there's burning of agricultural waste and then there is indoor pollution from unclean fuels used for cooking. Now the first lesson that any city has to learn is to do these updated source apportionment studies.
Basically you do an inventory of the different pollution loads and then you try and identify what are the sources. So if in Delhi the bulk of the pollution is coming from transport, in Mumbai it could be from construction dust for instance. So there are about 130 odd cities under the national clean air programme which are called the non-attainment cities and each one has to do that detailed source apportionment.
That's one thing. Second is that we have to make sure that we have a very extensive network of air quality sensors. Delhi has a lot more compared to other cities in India but even then we need to understand that there has to be a balance between large regulatory grade monitors and a network of low-cost monitors which can provide real-time information.
The third thing you need for this backbone is a decision support system which uses the air quality information that is coming in and then links it to the sources and helps the authorities to make those decisions in a fairly real-time basis. And the fourth part of the backbone has to be of course the enforcement authorities and the enforcement authorities are a combination of a state pollution control board or a pollution control committee and of course other law enforcement officials. So when you put this backbone together then you have to see you know what actually you have to do and I think one important element here and I've been writing about this consistently is that we need a mission more on dealing with air pollution.
We have the bulk of the world's cities currently suffering from very poor quality air in India. This is not something just to be kind of instinctively opposed to or something that we think is a shame or India or something like that. We have to understand that this is impacting not just our public health but also impacting labour productivity, it is impacting foreign investment and it is impacting GDP growth.
So if we are interested in our economic development we should be interested in cleaner air rather than thinking of cleaner air as an obstacle to economic development. Across the world we have seen that as cities and countries have cleaned up their investments, talent acquisition, growth, productivity has all increased rather than decreased. So we need a mission mode.
With that mission mode you need targets and you need short-term targets and medium-term targets so we can hold each other to account for getting to those targets. In the same way we are dealing with energy transition, the same way we're dealing with industrial decarbonisation or any other mission you take on, building roads or whatever it is. Once you get into a mission mode you have a long-term target supported by the short and medium-term targets, you know what to get to, you know the people who are responsible and you get on with it.
Govindraj Ethiraj: So if you were to pick one, for example you've talked about private vehicles as one category to address in Delhi and addressing it not just by bringing down the number but also focussing on issues like parking which becomes a disincentive to people to buy cars to start with. Is that something that you feel more feasible compared to the others, I mean in terms of friction and so on?
Dr Arunabha Ghosh: No, see there will always be friction at the outset for any kind of proposed change but at the same time we have to see the intervention here proposed here is not just for air quality, it actually improves your travel time while reducing congestion, it improves the fluidity in a city, the dynamism in the city. So parking has to be part of a solution that we have proposed as along with the investment in public transport, the number of buses that need to be there in addition of course to the metro railway etc and as well as the cleaning up of the actual fuel, so shifting away we are recommending a sales mandate for e-vehicles. Parking, decongestion, congestion pricing, public transport and the shift in the fuel type are part of the overall transport plan that we are suggesting.
Just one or the other if you do it then there will be the friction arises when you say there is only one solution and the others don't have to happen and then the consumer the citizen feels well you've just increased my parking rates but you've not reduced congestion or you've not provided me with a public transport alternative etc. It's when all of this comes together it's like this you know you go and do a surgery you can't say well I'm going to operate but I'm not going to sew up your wound or I'm not going to give you a post-op medication then obviously no one's going to want to go into that surgery.
Govindraj Ethiraj: Arunabha, thank you so much for joining me.
Dr Arunabha Ghosh: Sure, thank you Govind.
