Donald Trump's Tariffs: Rupee Hits Record Low
Mumbai, India: As a reaction to Trump’s tariff concerns, the Indian rupee hit a record low of Rs 87.07 against the US dollar on Monday. US President Donald Trump imposed new tariffs on key trading partners, Canada, Mexico, and China, and it has sparked fears of a trade war.
The rupee has dropped to 0.5% to a low of Rs 87.1450 per dollar in early trade, as against its previous close of 86.61/USD. Since last October, the rupee has fallen almost 4%.
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The sharp drop in the Indian rupee was majorly due to the recent executive orders signed by Trump.
The tariffs, set to take effect on Tuesday, include a 25% duty on most Canadian and Mexican imports and a 10% levy on goods from China. Canadian energy products will face a lower tariff of 10%. Trump invoked the International Emergency Economic Powers Act, citing a national crisis fueled by fentanyl and illegal border crossings.
The new trade restrictions have strengthened the value of US dollar, putting pressure on Asian currencies. The dollar index (which measures the US dollar against six major currencies) was up 0.3% to 109.8. Meanwhile, the Asian currencies weakened, with the Chinese yuan dropped 0.5% at 7.35 per US dollar.
Aside from this, rise in crude oil prices have also pressurised the local currency. Crude oil prices have also increased the worries over a full-scale trade war.
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As a result of Trump’s tariffs, the Indian stock market has also tumbled. Analysts observe that domestic stock markets could also remain under duress since Trump’s tariffs could likely generate more Foreign Institutional Investor (FII) outflows.
The tariff dispute has sent shockwaves through financial markets. The Mexican peso and Canadian dollar dropped in value following Trump’s announcement, while US stocks also saw declines. Bond yields rose as investors reacted to the potential economic slowdown. Trade lawyers predict potential legal challenges to the tariffs, particularly given the sweeping nature of Trump’s executive orders.
