The summer of 2025 has been extremely eventful for investors: some stock markets setting new record high levels even as US President Trump reverses decades-old dogma of Free Trade.
The application of punitive tariffs on trading partners underscores a new political paradigm that has caused considerable volatility in asset prices, as investors scramble to calculate the costs of these new policies.
In short: we find ourselves in a new world order where there will be new risks but also new opportunities for investors to seize.
One such arena of change is in the currency markets. The US has abandoned its long-held position of advocating for a “strong dollar”, seeing the broad dollar DXY index slide by almost -10% for far this year.
Ostensibly, the Trump Administration takes the view that a weaker dollar will attract Foreign Direct Investment into US manufacturing – for which there is little evidence so far that this is happening.
This drive to weaken the dollar is further reinforced by deficit spending under the tax bill that was signed into law on July 4. The US national debt (currently at USD 36 trillion) will likely climb another USD 3 trillion over the coming years as income tax cuts for higher-earning households are financed by borrowing, putting further pressure on the dollar.
The main preoccupation of markets now is when the US Federal Reserve can resume its interest rate easing cycle. The Fed Funds target rate has been on hold at 4.50% since December 2024, a fact that has drawn unusual open criticism from the White House.
The stumbling block to lower rates has been persistent inflation that remains above the target level of 2%. A turning point may have been achieved earlier this month that demonstrated a considerable deceleration in job growth. Looking ahead for the rest of 2025, we anticipate higher asset prices as rates are cut, and more trade deals are signed.
Chakri Lokapriya on India – Impact of US Tariffs
US Tariffs on India: A 50% total tariff (25% from Aug 7, +25% from Aug 27, 2025) could significantly impact Indian exports, with a 21-day negotiation window to resolve.
Economic Impact:
GDP growth may fall from6.5% to 5.7%.
India face some of the highest tariffs globally.
Corporate earnings (EPS) could drop by~2%, reducing growth to 6–8%.
If tariffs remain at 50%, a market correction of 5% or more is possible.
Investor Sentiment:
India has gone from most favoured to most underweight among Asian markets.
If tariffs are reduced to 25%, meaningful upside is possible.
However, over a two-year or more extended period, the impact wanes as India finds new markets and benefits, since 85% of India’s economy is domestic-facing
US–Russia Talks:
India will benefit only if the US–Russia deal includes a tariff waiver for it.
If not, the 50% tariff remains a negative outcome for India.
Sectoral Impact:
Under a 50% tariff, exports of textiles, furniture, machinery, carpets, chemicals, and diamonds to the US would become unviable.
Metals remain viable due to global pricing.
Low-risk sectors include Pharmaceuticals, Oil and gas, Healthcare, Financial Services, and IT and electronic Services.
Operational Risks & Government Response:
Potential job losses in labour-intensive sectors.
Expected fiscal support and banking safeguards to mitigate the impact.
The author, Stefan Hofer, is the Chief Investment Strategist at LGT APAC, and Chakri Lokapriya is CIO-Equities at LGT Wealth.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
