Indian Stock Market: Metal stocks witnessed selling pressure in trade on Wednesday, January 22, as US President Donald Trump's tariff threats on the world's largest consumer of base metals, China, raised concerns about the potential impact on global demand and prices.
The Nifty Metal index tumbled 2.23% in intraday trade, hitting the day's low of 8,341. Fourteen out of fifteen index constituents traded in the red, with Welspun Corp, SAIL, Jindal Steel & Power, and National Aluminium leading the losers' list with losses ranging from 3.5% to 4%.
Today's decline has pushed the index to a 3.4% correction in January so far. Notably, the index has been on a downward trend since October 2024, losing 18% to date.
Trump said late on Tuesday that his administration was discussing imposing a 10% tariff on goods imported from China starting February 1. On the same day, he previously announced that Mexico and Canada would face levies of around 25%, citing concerns over illegal immigration at the US border.
China accounts for approximately 50% of the global output of base metals, as the country's economy heavily depends on the property sector, which faced significant challenges after COVID-19.
The world's second-largest economy has implemented several monetary and fiscal measures, including interest rate cuts and the unification of minimum down payments for home loans, aimed at revitalising the property market.
These measures have also supported the rally in base metals such as copper and aluminum, helping the Chinese economy bounce back. Recent data suggests that China’s economy has rebounded, with GDP expanding by 5.4% year-on-year (YoY) in Q4 2024, up from 4.6% in Q3 and surpassing market estimates of 5.0%. For the full year, GDP grew by 5%, aligning with Beijing's 2024 target of around 5%.
On the trade front, exports recorded a double-digit rise in December, marking the ninth consecutive monthly gain and reaching the highest level in three years as firms rushed to complete shipments.
However, concerns are growing that if Trump implements the proposed tariff hikes on China, which is now in recovery mode, it could negatively affect its property market and reduce the demand for metals, impacting global metal prices. The decline in prices could also pressure the margins of Indian metal companies.
Apart from China, Trump also vowed to impose duties on European imports without providing further details. Additionally, he threatened 100% tariff hikes on BRICS nations, including India, stating that member countries would face such tariffs if they continued their de-dollarization efforts.
These tariff threats triggered a slump in base metal prices on the London Metal Exchange during Tuesday's trade, a trend that has continued into today's session. Three-month copper on the London Metal Exchange (LME) slid 0.4% to $9,251 in today's session, LME aluminium eased 0.2% to $2,641, nickel fell 0.7% to $15,960, lead shed 0.2% to $1,968 and zinc was down 0.2% to $2,914.
During his election campaign, Trump pledged sweeping tariffs against trading partners, including proposing levies of 60% on Chinese products. After his election, he further threatened an additional 10% duty on China, citing issues such as fentanyl trafficking and the chemicals used to produce the deadly drug. He also warned of imposing 25% tariffs on Mexico and Canada if they failed to assist the US in securing its borders.
Trump's policies under his "Make America Great Again" agenda focused on strengthening American industries and creating jobs. During his first term, he implemented several measures, including raising tariffs on imported goods—particularly those from China—to protect American manufacturers, tightening H-1B visa regulations, and reducing the federal corporate tax rate from 35% to 21%.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.
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