US: Tariffs threaten trade war, could plunge world into recession; global exports expected to fall by 1.6 percent
New Delhi| The threat of trade war has increased all over the world due to the imposition of retaliatory tariffs by US President Donald Trump. With this step, the pace of the global economy is expected to slow down and inflation and unemployment are expected to increase rapidly across the world. Experts say that after this decision of America, if other affected countries take retaliatory steps, the situation may worsen, due to which the world will be in danger of getting stuck in recession.
Brokerage company Bernstein said in a note that some countries like China may announce retaliatory measures against the US, which will lead to a worldwide trade war. This will not only increase inflation a lot, but there will also be a risk of recession. However, many economies will try to ease the situation by negotiating a backward path, due to which the situation can be expected to improve somewhat.
JP Morgan, another brokerage, believes the new tariffs could lead to a major economic decline. Due to this, both America and the global economy may get stuck in the quagmire of recession. JPMorgan’s analysis suggests that if these tariffs are fully implemented, the US effective tariff rate could reach a level of 25 per cent, impacting imports of US products worth $3.3 trillion.
The brokerage company said, complete implementation of these policies will be a major economic blow. This shock will affect market sentiment around the world. Therefore, the coming days will be very important, as the entry into force of the new tariffs and the negotiation process will determine their long-term impact.
HSBC said in a research report, the pace of global trade may slow down due to tariffs. The growth rate of global exports may decline by 1.6 per cent from 2.9 per cent in 2024 to just 1.3 per cent in 2025-26. The main reason for this is the decline in demand in America and increasing uncertainty regarding global investment and trade. This decline is a negative impact on global investment due to the decline in US imports and the ambiguity of trade policies.
Global GDP had declined by one percent in Trump’s first term
HSBC said, during Trump’s first term, global GDP declined by about one percent in two years due to trade tensions and tariffs. But, this time the tariffs are more widespread and severe than before.
Inflation: Danger of increasing by two percent
JP Morgan said, tariffs will affect inflation. This year, inflation may increase by two percent all over the world. Due to increase in inflation, not only will demand and consumption decline, but there is also a possibility of increase in unemployment.
Market turmoil in the near future
According to market experts, increased global uncertainty may lead to recovery and market turmoil in the near future, but the outlook remains positive in the long run. Axis Securities said the tariff cap, which has exceeded market expectations, is expected to maintain market volatility in the near future.
These measures could naturally complicate the direction of the US Federal Reserve’s monetary policy, the brokerage firm said. Increasing trade disruption could lead to a recession in the US, which would affect the entire world. Axis Securities sees this as an opportunity and recommends increasing investment by 10% and investing in high quality stocks using market declines.
India’s GDP will decrease by 0.5%
EY believes that a 27 per cent tariff could reduce the growth rate of the Indian economy by 0.5 per cent. This could reduce GDP growth to 6 per cent. Moreover, exports to the US could fall by 2-3 per cent in the current fiscal year.
Anubhuti Sahay, head of economic research in India at Standard Chartered Bank, said, if other things remain the same, India’s growth rate could be affected by 0.35 to 0.40 per cent. However, the final impact will depend on the trade agreement between India and the US.
India will find a way out through talks
Bernstein believes that the IT and pharma sectors are exempted from tariffs. These sectors are very important for the Indian economy. This will provide relief to India. On the other hand, India may benefit from the loss to China, because the tariff on Chinese products is even higher. On the investment front, the brokerage company says, bilateral talks are going on between India and America, with this India will deal with the challenges and will talk to America instead of increasing the trade war.
