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The Indian rupee, which has staged a remarkable rebound in 2025, could face headwinds as the possibility of new tariffs from the US looms. The rupee has gained 2.1% so far this month, outperforming most of its Asian peers and reclaiming levels last seen at the end of 2024. However, with US tariffs slated to be introduced on April 2, this upward trajectory may come under pressure.
The rupee’s strength has been supported by persistent dollar inflows linked to inter-company borrowings, repatriation of corporate profits, and foreign investment in Indian bonds and equities. These factors, combined with a weaker US dollar driven by dovish signals from the Federal Reserve and global economic uncertainty, have created a favourable environment for the rupee, experts say.
A weaker dollar has typically eased pressure on emerging market currencies, including the rupee, as capital flows shift toward higher-yielding assets. However, the dollar’s slide has been driven by factors that could reverse if geopolitical and trade tensions escalate.
Tariffs could disrupt momentum
Donald Trump’s proposed tariffs have reignited fears of a global trade slowdown. If these tariffs take effect, they could undermine US growth and trigger a flight to safe-haven assets, boosting the dollar. This scenario would increase pressure on emerging market currencies, including the rupee, which has benefited from a weaker dollar environment.
The Reserve Bank of India (RBI) has been actively managing rupee volatility, conducting significant dollar-rupee buy-sell swaps over the past month. While these interventions have stabilised the currency, a prolonged trade conflict could complicate efforts to maintain rupee stability, potentially leading to capital outflows and renewed pressure on the currency.
Beyond India, other emerging markets could experience a surge in volatility if trade tensions escalate. While a weaker dollar has generally been positive for emerging markets, the risk of a trade war could offset these gains by slowing global growth and reducing demand for exports.
Outlook hinges on trade negotiations
The rupee’s trajectory now depends on the outcome of US tariff negotiations and their impact on global trade. If tariffs escalate, investor sentiment may shift quickly, driving renewed demand for the dollar and reversing the gains that emerging market currencies, including the rupee, have enjoyed. For now, the rupee’s rally faces a critical test as the global trade environment remains uncertain.“,”next_sibling”:[{“msid”:119475579,”title”:”Trump’s China ship fees risk sinking US maritime jobs, supply chains”,”entity_type”:”ARTICLE”,”link”:”/news/industry/trumps-china-ship-fees-risk-sinking-us-maritime-jobs-supply-chains/119475579″,”link_next_mobile”:”/news/industry/trumps-china-ship-fees-risk-sinking-us-maritime-jobs-supply-chains/119475579?next=1″,”category_name”:null,”category_name_seo”:”industry”}],”related_content”:[],”seoschemas”:false,”social_share”:{“fb”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=facebook&utm_medium={{DEVICE_TYPE}}”,”x”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=twitter&utm_medium={{DEVICE_TYPE}}”,”whatsapp”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=wapp&utm_medium={{DEVICE_TYPE}}”,”linkdin”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=linkedin&utm_medium={{DEVICE_TYPE}}”,”telegram”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=telegram&utm_medium={{DEVICE_TYPE}}”,”copy”:”/news/industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar/119475719?utm_source=copy&utm_medium={{DEVICE_TYPE}}”},”cat_msid”:25384693,”cat_sub_msid”:false,”msid”:119475719,”entity_type”:”ARTICLE”,”title”:”Will Trumpu2019s tariffs halt the rupeeu2019s sprint against dollar?”,”synopsis”:”If tariffs escalate, investor sentiment may shift quickly, driving renewed demand for the dollar and reversing the gains that emerging market currencies, including the rupee, have enjoyed, experts say.”,”titleseo”:”industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar”,”status”:”ACTIVE”,”authors”:[{“author_name”:”ETBFSI Research”,”author_link”:”/author/479258160/etbfsi-research”,”author_api_link”:”/author/479258160″,”author_image”:””,”author_additional”:{“thumbsize”:false,”msid”:479258160,”author_name”:”ETBFSI Research”,”author_seo_name”:”amol-dethe”,”designation”:”Editor”,”agency”:false}}],”Alttitle”:{“minfo”:””},”artag”:”ETBFSI”,”artdate”:”2025-03-25 16:22:14″,”lastupd”:”2025-03-25 16:23:16″,”breadcrumbTags”:[“Trump tariffs”,”emerging markets”,”Reserve Bank of India”,”global trade slowdown”,”dollar inflows”,”trade tensions”,”currency stability”,”dollar”,”rupee”,”federal reserve”],”secinfo”:{“seolocation”:”industry/will-trumps-tariffs-halt-the-rupees-sprint-against-dollar”}}” data-authors=”[” etbfsi data-author-list=”ETBFSI Research” data-category-name=”Industry” data-category_id=”23″ data-cat_msid=”25384693″ data-date=”2025-03-25″ data-index=”article_1″ data-keywords=”Trump tariffs, emerging markets, Reserve Bank of India, global trade slowdown, dollar inflows, trade tensions, currency stability, dollar, rupee, federal reserve” data-type=”news”>
If tariffs escalate, investor sentiment may shift quickly, driving renewed demand for the dollar and reversing the gains that emerging market currencies, including the rupee, have enjoyed, experts say.
“>
The Indian rupee, which has staged a remarkable rebound in 2025, could face headwinds as the possibility of new tariffs from the US looms. The rupee has gained 2.1% so far this month, outperforming most of its Asian peers and reclaiming levels last seen at the end of 2024. However, with US tariffs slated to be introduced on April 2, this upward trajectory may come under pressure.The rupee’s strength has been supported by persistent dollar inflows linked to inter-company borrowings, repatriation of corporate profits, and foreign investment in Indian bonds and equities. These factors, combined with a weaker US dollar driven by dovish signals from the Federal Reserve and global economic uncertainty, have created a favourable environment for the rupee, experts say.A weaker dollar has typically eased pressure on emerging market currencies, including the rupee, as capital flows shift toward higher-yielding assets. However, the dollar’s slide has been driven by factors that could reverse if geopolitical and trade tensions escalate.
Tariffs could disrupt momentum
Donald Trump’s proposed tariffs have reignited fears of a global trade slowdown. If these tariffs take effect, they could undermine US growth and trigger a flight to safe-haven assets, boosting the dollar. This scenario would increase pressure on emerging market currencies, including the rupee, which has benefited from a weaker dollar environment.
The Reserve Bank of India (RBI) has been actively managing rupee volatility, conducting significant dollar-rupee buy-sell swaps over the past month. While these interventions have stabilised the currency, a prolonged trade conflict could complicate efforts to maintain rupee stability, potentially leading to capital outflows and renewed pressure on the currency.Beyond India, other emerging markets could experience a surge in volatility if trade tensions escalate. While a weaker dollar has generally been positive for emerging markets, the risk of a trade war could offset these gains by slowing global growth and reducing demand for exports.Outlook hinges on trade negotiations
The rupee’s trajectory now depends on the outcome of US tariff negotiations and their impact on global trade. If tariffs escalate, investor sentiment may shift quickly, driving renewed demand for the dollar and reversing the gains that emerging market currencies, including the rupee, have enjoyed. For now, the rupee’s rally faces a critical test as the global trade environment remains uncertain.