Tariff tracker: Licence-Permit Raj makes its way to the US

Nvidia is not a small company; it is part of the so-called Magnificent 7 tech companies in the US, and its market capitalisation (the total value of its stock market shares) was around $3 trillion at start of 2025 — far excess of the total market capitalisation of the DAX 40 Index that comprises Germany’s 40 largest publicly traded companies.

ASML, a Dutch company (also listed in the US) that supplies equipment to semiconductor manufacturing firms such as Intel and TSMC, stated that its revenues in the first quarter of 2025 undershot expectations by around a billion euros, thanks to tariffs and the continuing uncertainty. ASML shares too fell by 7%. As did the value of the Philadelphia Semiconductor sector index, which maps the 30 largest US-traded companies primarily involved in the design, distribution, manufacture. This index is down a whopping 25% since the start of 2025 (see CHART 1; source: Yahoo! Finance).

The slide in the stock markets was not helped by the comments of US Federal Reserve Chairman Jay Powell.

Overall, the benchmark indices fell across the board with the tech-heavy NASDAQ 100 falling the most (more than 3%). (SEE CHART 2; Source: Google Finance)

The benchmark indices fell across the board.

If US cues are anything to go by, investors can expect more weakness in the Indian markets as well.

Fed won’t rescue the markets

The slide in the stock markets was not helped by the comments of US Federal Reserve Chairman Jay Powell. While speaking at the Economic Club of Chicago, Powell was asked by Raghuram Rajan (Prof in Chicago University and former RBI Governor): “Some people believe that the Fed will intervene if the stock market plummets — the so-called Fed put. Are they correct?” Powell replied: “I’m gonna say no but with an explanation”. Essentially, Powell believed that the markets are processing the trade policy initiatives by the Trump Administration and reflecting the fact that no one really knows where things may end up.

Powell, however, left no doubt about the likely impact of tariffs on the US economy. “Let’s look back at 2024. The economy grew by 2.4%, unemployment was in low fours (just above 4%), which is considered to be full employment, and inflation came down steadily to 2.5% (pretty close to the Fed’s target of 2%). That’s where the economy stood at the end of 2024. Where we are now: The (Trump) Administration is implementing significant policy changes, especially trade is now in focus. And the effects of that are likely to move us away from our goals. So unemployment is likely to go up as the economy slows in all likelihood, and inflation is likely to go up as tariffs go up and some part of those tariffs are paid by the (US) public.”

A matter of respect

In the background of the mayhem in the markets, both the US and China continued to rally support among other trading nations.

Japan seems to be at the forefront of trade negotiations with the US with Trump announcing that he will be sitting in even in the initial stages of the discussions.

It is being increasingly reported that the US could be asking countries to take an aggressive stance against China as part of the deal — a move that seems to underscore the view that Trump’s tariff policy is essentially about containing China’s rise.

For its part, China is also shoring up alliances; Xi Jinping was in Malaysia shoring up support.

But with regard to the US, China has been resolute and defiant. In response to Trump’s willingness to receive a call from Xi Jinping, China has responded by first demanding “respect” from the US and warning US officials from making disparaging remarks about China.

The fact is, irrespective of the comments made by the likes of Vice President J D Vance (who referred to Chinese citizens as peasants), Trump and his administration have arguably been even more disrespectful against their traditional allies such as Canada and EU. Canadians have responded by adopting slogans such as “Elbow Up” and “Canada is not for sale” to show their deep disapproval of Trump’s brash approach.

China’s response is yet another reminder that lack of respect can burn the bridges that could have been used to reach an agreement.