Mumbai: Donald Trump’s assertion of ‘buy American and hire American’ policy in his inaugural speech after taking charge as the 45th US President is expected to create risk aversion in emerging market equities including India as it signals a major policy shift towards protectionism.
While the markets would still wait for more clarity on the proposed policies, Mr Trump’s latest speech highlighting the broader policy direction that his government would follow according to market experts is likely to trigger profit booking in companies exposed to US markets. “It is an unambiguous signal of the start of a new era of fierce protectionism for American jobs and trade as well as isolationism. Trade wars, retaliatory tariffs and barriers to free movement of people and trade can cause turbulence in global markets,” said Ajay Bodke, CEO and chief portfolio manager, PMS at Prabhudas Lilladher.
“One needs to closely watch the detailed fleshing out of Mr Trump’s policies over the next few days to gauge the exact impact. Outsourcing industry and exporters to the US would need to be especially worried about this assertive call to protectionism,” he added.
According to Vijay Singhania, founder-director of Trade Smart Online, the sentiments across the Asian markets have turned cautious with Mr Trump taking charge. Investors fear that his protectionist promises if fulfilled could erode the benefits to emerging markets.
Mr Trump has threatened a 45 per cent tariff on imports from China and a 35 percent border tax on imports by US companies shipping jobs overseas. He has also pledged a one-off tax rate cut for US firms bringing money held overseas back home to 10 per cent from 35 per cent. The US firms have $2.6 trillion stashed abroad and any rapid repatriation could wreck havoc in Asian markets,” noted Mr Singhania.
