Talking Point This Week — Certain Uncertainty

Protectionism might sound good on paper, but it can lead to higher prices for consumers, a trade war, and an economic slowdown. Inhabitants of the world economy are not necessarily doomed, but the road ahead looks rocky, to say the least.

Here are the key talking points of the week gone by:

Vibecession is a term coined by economist Kyungho Jang to describe a situation where economic indicators, such as GDP growth, appear strong but consumer sentiment remains gloomy. And it appears that this might be true for many economies today – or at least the sentiment in these economies. Tariffs are firmly in the spotlight, but history tells us they are a double-edged sword. Noted investor Ramesh Damani, in an interview to NDTV Profit, says that he believes that the market verdict will make the US realise that it has been too strong on the tariff push. Note, the US last slapped on mass tariffs in 1828 and 1930, and both times, the economy tanked. It's a pattern that should give us pause.

Protectionism might sound good on paper, but it can lead to higher prices for consumers, a trade war, and an economic slowdown. Inhabitants of the world economy are not necessarily doomed, but the road ahead looks rocky, to say the least.

Here are the key talking points of the week gone by:

Even as the United States offered a 90-day reprieve from reciprocal tariffs to non-retaliating trading partners, the levies on China were raised to as high as 125%. Beijing has retaliated with 125% tariffs on US imports, while adding that it would not reciprocate any further. The country's finance ministry noted that "there is no longer any possibility of market acceptance for US goods exported to China". 

One of the key reversals is the US-EU partnership, a cornerstone of western stability for nearly 80 years, facing an unprecedented rift. Shared economic interests and strategic alignment are being tested by a radical shift in US foreign economic policy under President Donald Trump. These changes don't get reversed soon.

Do note that early in the week, Germany said it wants the European Union to consider using its most powerful tool to retaliate against Trump’s trade war. “We have to take a close look at the anti-coercion instrument, which are measures that go far beyond tariff policy,” including digital services, German Economy Minister Robert Habeck said on Monday, referring to a measure that would allow the bloc to target Big Tech companies. That tool, typically labeled the “bazooka” in the EU’s trade arsenal, was established primarily as a deterrent option to avoid coercive economic practices by major trade partners such as China or the US. Let us see how this goes.

American debt is behaving like EM debt! Literally. Picture this eye-popping rise in long-dated US bond yields early in the week. The 20-year yield leaped 17 basis points on Tuesday, taking its two-day rise to 37 basis points. The 30-year yield was also up by around 37 bps during the first two days of this week. If you exclude the Covid-19 pandemic period, then this marked the steepest two-day rise in the long bond yield in more than 40 years.

Economists at JPMorgan noted that Federal Reserve Chair Jerome Powell's speech was his most hawkish in some time, while economists at Morgan Stanley changed their Fed forecast and now see no rate cuts at all this year. Could this be the reason this is happening? A Gavekal note said one possible explanation is that China may be selling down its treasury holdings before exchanging its US dollars for gold, or for the currencies of countries with whom it has a less adversarial relationship.

Tata Consultancy Services' earnings were inline with the street estimates, with revenue marginally down and net profit slipping sequentially. The deal wins worth $12.2 billion in the fourth quarter were higher than estimate, and pointed towards no impact on discretionary spends so far. However, the environment has turned uncertain post March.

The IT major's fiscal 2026 revenues are estimated to be better than fiscal 2025. The guidance is based on a healthy growth in total contract value. TCS also expects a revival in cost efficiency spends as tariffs force companies to protect margin and profitability.

As we end, we hope for no repeating or rhyming of history. History always screams a warning, and uncertainty breeds more uncertainty, a relentless chain reaction. The Smoot-Hawley tariffs of 1930 didn’t just nudge the Great Depression along—they amplified it, gutting global trade and slamming German exports hard. That economic wreckage paved the way for Adolf Hitler’s comeback, turning a political has-been into a rising threat, a trajectory meticulously tracked by William Shirer in The Rise and Fall of the Third Reich. Now, try mapping that domino effect onto today’s shaky landscape—it’s a chilling thought that hits like a freight train!

Until Next Time...

Niraj Shah