Trump's Gradual Tariff Approach Eases Market Concerns

In his second term, President Trump takes a gradualist stance on tariffs, contrasting his previous aggressive rhetoric. Financial markets respond to the less severe measures, while awaiting key interest rate decisions from the Federal Reserve amidst political pressure for global rate reductions.

In contrast to his previous aggressive campaign rhetoric, U.S. President Donald Trump is adopting a more gradual approach to tariff announcements in his second term, a report by Union Bank of India finds. This has eased market concerns, with financial markets responding to Trump's current tariff measures more calmly than anticipated.

Trump had threatened to impose tariffs on several countries, including China, Mexico, Canada, and the Eurozone. However, the proposed measures are more moderate. For example, a 10 percent tariff on Chinese goods is markedly lower than the 60 percent initially suggested, resulting in the Dollar Index correcting by around 1 percent since January 20, 2025.

The gradualist approach extends to a proposed 25 percent tariff on goods from Mexico and Canada, expected to be implemented from February 1, along with a 2.5 percent tariff on global goods. This moderation is seen as relieving market fears of harsher measures, with attention now turning to the Federal Open Market Committee meeting on January 29.

(With inputs from agencies.)