US Trade Policy Uncertainty Threatens Asian Economies
Ongoing uncertainty regarding U.S. trade policies, particularly recent tariff decisions by the Trump administration, is expected to negatively impact business confidence and consumer sentiment across Asia, including India. Moody’s Ratings highlighted that these developments could significantly hinder regional economic growth. While a temporary delay in tariffs has been announced, the situation remains precarious, especially for countries like China, which faces steep tariffs.
Tariff Delays and Their Implications
President Donald Trump recently announced a three-month delay in implementing reciprocal tariffs on most countries, with China being the notable exception. A hefty 125 percent tariff is already in place for Chinese goods, alongside an additional 10 percent duty on exports to the U.S. This ongoing pressure on global trade dynamics raises concerns about the overall economic landscape.
Nicky Dang, Senior Vice President at Moody’s Ratings, emphasized that escalating tensions between the U.S. and China, coupled with a slowdown in the Chinese economy, pose significant risks to growth prospects in the region. While India may show some resilience due to its large domestic market, Moody’s cautions that any substantial shift in investment flows could take years to materialize.
India’s Growth Forecast Adjusted
In light of these global headwinds, Moody’s Analytics has revised India’s growth forecast for the 2025 calendar year down to 6.1 percent, a decrease from the previously projected 6.4 percent. The agency cited trade volatility and external economic pressures as key factors influencing this adjustment. Although the recent tariff pause may mitigate immediate impacts, the persistent 10 percent universal duty and the region’s exposure to the U.S. economy continue to pose threats to Asian markets.
Dang noted that the uncertainty surrounding U.S. trade policies is likely to undermine business confidence and consumer sentiment, which could lead to reduced domestic demand and lower growth prospects. Additionally, the tariffs on Chinese exports, which remain unaffected by the pause, further strain China’s economic growth.
The Shift Towards De-globalization
Despite the temporary tariff moratorium, Dang asserts that it does not reverse the broader trend of de-globalization. Instead, it adds to the unpredictability of trade policies, particularly as the U.S. pushes for the reshoring of manufacturing supply chains. This shift reflects a fundamental change in the global trading system, which has traditionally relied on trust and established rules.
The evolving landscape of international trade is prompting countries to reassess their strategies and adapt to new realities. As nations navigate these changes, the implications for global commerce and economic stability remain significant.
Opportunities in India-US Trade Relations
Trade experts in India view the 90-day tariff pause as a crucial opportunity to advance negotiations on the proposed Bilateral Trade Agreement (BTA) between India and the U.S. Currently, bilateral trade stands at approximately USD 191 billion, with a mutual goal of increasing it to USD 500 billion by 2030. Negotiators aim to finalize the first phase of the BTA by September or October this year.
The temporary moratorium allows governments to negotiate more favorable terms, although higher overall tariffs continue to exert inflationary pressure on the U.S. economy. However, the ongoing policy uncertainties are likely to weaken business and consumer sentiment, posing additional risks to growth in the region.
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