This section offers content on things happening in the country. Any news update on India, its GDP, plans and levels globally will be included in this section.
Mark Carney’s election as Canada’s Prime Minister in April 2025 heralds a potential thaw in the frosty relations between India and Canada. With his extensive background in economics and finance, Carney’s leadership could pave the way for renewed economic collaboration between the two nations.
The Economic Rift
India and Canada have historically maintained robust economic ties, with bilateral trade reaching approximately CAD 10.5 billion in 2022. However, diplomatic tensions, particularly surrounding the Khalistan issue and the 2023 killing of Hardeep Singh Nijjar in British Columbia, led to a significant downturn in relations. This diplomatic chill hurt trade negotiations, notably stalling the Comprehensive Economic Partnership Agreement (CEPA) talks.
Carney’s Vision: Rebuilding Economic Bridges
Carney has emphasized the importance of diversifying Canada’s economic partnerships, explicitly identifying India as a key player in this strategy. He has described the Canada-India relationship as “incredibly important,” highlighting its multifaceted nature, encompassing personal, economic, and strategic aspects.
While Carney has not directly addressed the Nijjar incident, his commitment to resolving bilateral strains through mutual respect suggests a willingness to engage in constructive dialogue with India.
Economic Implications of Carney’s Victory
Trade Relations
India and Canada have historically shared a robust trade relationship. India and Canada have traditionally shared a robust trade relationship. In 2023, bilateral merchandise trade between the two countries was valued at approximately C$12.5 billion, with Canada’s exports to India at C$5 billion and imports from India at C$7.5 billion. Key exports from Canada to India include mineral products, vegetables, and metals, while India exports chemical products, textiles, and foodstuffs to Canada.
Top Canadian Exports to India (2023)
Coal Briquettes: $1.29 billion
Crude Petroleum: $1.18 billion
Diamonds: $989 million
Wood Pulp: $500 million
Lentils: $400 million
Top Indian Exports to Canada (2023):
Pharmaceuticals: $1.2 billion
Telephones and Communication Devices: $900 million
Automobile Parts: $700 million
Seafood: $500 million
Jewelry: $400 million
Carney’s economic expertise, honed during his tenure as Governor of the Bank of Canada and the Bank of England, positions him to navigate and potentially enhance this trade relationship. His focus on economic stability and growth could lead to the resumption of stalled trade negotiations and the exploration of new avenues for collaboration.
Investment Opportunities
Canada’s investment in India spans various sectors, including infrastructure, clean energy, and technology. Carney’s leadership may encourage increased Canadian investments in India’s burgeoning markets, aligning with India’s goals of sustainable development and technological advancement.
Education and Immigration
Canada has been a preferred destination for Indian students, with over 200,000 Indian students enrolled in Canadian institutions as of 2023. However, recent years saw a decline due to visa processing delays and diplomatic tensions. Carney’s administration is expected to streamline visa processes and reinforce Canada’s commitment to being an inclusive destination for international students, potentially revitalizing educational exchanges.
Challenges Ahead
Despite the optimistic outlook, several challenges persist.
Political Sensitivities
The Khalistan issue remains a sensitive topic. While Carney has not directly addressed the Nijjar incident, his emphasis on mutual respect suggests a cautious approach to politically charged matters. Balancing domestic political considerations with international diplomacy will be crucial.
Global Trade Dynamics
Carney’s tenure begins amidst global economic uncertainties, including trade tensions with the United States. Navigating these complexities while fostering a strong bilateral relationship with India will require strategic diplomacy and economic foresight.
Conclusion
Mark Carney’s ascent to Canada’s premiership offers a promising opportunity to revitalize India-Canada relations, particularly in the economic sphere. His background and stated priorities suggest a focus on rebuilding trust, enhancing trade, and fostering mutual growth. While challenges remain, the potential benefits of renewed collaboration are significant for both nations.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
In the rarefied world of Swiss luxury watches, time is money. For decades, China was the golden hour. However, in April 2025, the Swiss are setting their sights firmly on India.
According to the Federation of the Swiss Watch Industry (FH), India’s imports of Swiss watches increased by 18.5% year-over-year in 2024, making it the fastest-growing primary market globally. Brands like Rado, Omega, and Tissot are making a decisive pivot towards India, indicating a profound shift in the global luxury landscape.
Why Are Swiss Watchmakers Turning to India?
1. China’s Luxury Slowdown
China, once the growth engine for luxury goods, is experiencing a sharp decline in growth. The post-pandemic recovery has been uneven, burdened by high youth unemployment (exceeding 14% according to China’s National Bureau of Statistics) and a real estate crisis that has impacted discretionary spending. Brands like Rado, part of the Swatch Group, have reported sluggish sales in China, pushing them to look elsewhere (Source: Livemint).
2. India’s Rising Wealth and Aspirations
India, in contrast, is booming. With a GDP growth rate projected at 6.5% for FY26 (World Bank estimates), rising disposable incomes, and an expanding upper-middle class, India is emerging as a luxury powerhouse. According to Bain & Company, India’s luxury market is expected to reach $200 billion by 2030, up from $8.5 billion in 2022.
3. Changing Consumer Behavior
Indian consumers are not only becoming wealthier; they are also becoming more brand-conscious. Luxury is no longer about necessity or tradition — it’s about status, self-expression, and social media validation. A survey by Statista reveals that 52% of Indian millennials consider owning luxury products as a symbol of success.
Data Snapshot: Swiss Watch Exports to India
Year
Value of Swiss Watch Imports to India (in CHF million)
2020
92.2
2021
136.3
2022
188.5
2023
223.7
2024
265.0 (estimated 18.5% YoY growth)
(Source: Federation of the Swiss Watch Industry)
Case Study: Rado’s Big Bet on India
Rado, known for its sleek ceramic watches, has declared India its most significant market globally, surpassing China (Source: Economic Times).
Rado’s CEO, Adrian Bosshard, announced plans for an aggressive expansion, including the opening of exclusive boutiques in Tier II and Tier III cities. This reflects a strategic shift: luxury is no longer confined to Delhi and Mumbai — cities like Jaipur, Surat, and Chandigarh are becoming essential hubs.
Macro Trends Fueling the Shift
Demographic Dividend: Over 65% of India’s population is under 35 years old (Source: UN Population Report), a prime age group for aspirational luxury purchases.
Urbanization: India adds 10 million urban dwellers annually, expanding the consumer base for premium brands.
Digital Influence: E-commerce penetration in luxury retail is growing, with platforms like Tata Cliq Luxury reporting a 40% YoY growth.
Global Brand Entry: Louis Vuitton, Cartier, and newer entrants like Panerai are expanding their footprint in India, encouraged by improving infrastructure and ease of doing business rankings.
The “China Plus One” Strategy in Luxury
Just as manufacturers diversified from China to Vietnam and India to enhance supply chain resilience, luxury brands are now diversifying their consumer markets. The “China Plus One” strategy isn’t just for factories anymore — it’s also for storefronts, boutiques, and brand expansions.
A Jing Daily report notes that many luxury brands anticipate “modest” growth in China for the foreseeable future and are actively seeking to boost their exposure in India, Vietnam, and Indonesia.
Swiss Brands Doubling Down
Beyond Rado, other Swiss giants are also recalibrating:
Omega: Launching new boutiques focused on experience-led shopping.
Tissot: Partnering with Indian celebrities to strengthen brand recall.
Tag Heuer: Rolling out India-exclusive limited editions.
Even ultra-high-end brands like Patek Philippe and Audemars Piguet, traditionally cautious, are evaluating deeper engagements in the Indian market.
Challenges Ahead
While the Indian market is booming, challenges persist:
Counterfeit Market: Estimated at 30% of luxury watch sales in India.
Consumer Education: First-time luxury buyers often need more brand education.
However, industry players believe these are “good problems” compared to stagnant or declining growth in other sectors.
Conclusion: It’s India’s Time
The Swiss watch industry is renowned for its meticulousness, taking pride in its precision and attention to detail. That they are now pivoting towards India with such urgency signals a structural, not cyclical, change. India isn’t just a stopgap; it is becoming a central pillar of the global luxury economy.
In the timeless world of Swiss watches, the hands move rapidly, pointing unmistakably to India.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
In early 2025, the global economy experienced a brief respite as major economies, including the United States, announced a temporary suspension of certain tariffs. This move was anticipated to alleviate the mounting pressures on international trade and supply chains. However, beneath this surface-level relief lies a complex web of challenges that continue to strain global supply chains and economic stability.
The Global Tariff Pause: A Superficial Relief
The United States’ decision to suspend tariffs on select imports from Canada and Mexico for 30 days was seen as a strategic move to ease tensions. Yet, this pause did not extend to tariffs on Chinese goods, which remained at a 10% levy, particularly affecting textiles, machinery, and electronics. Furthermore, retaliatory measures from affected countries, such as Canada’s announcement of a 25% tariff on over $100 billion worth of U.S. exports, indicate that trade tensions are far from resolved.
Limited Scope of Pause: The U.S.–China tariff pause covers a freeze on new tariffs, but more than $300 billion worth of existing duties remain untouched. According to the USTR 2024 report, 66% of tariffs imposed since 2018 remain in effect, particularly on key industrial and technological goods.
Investor Sentiment Unchanged: Global market participants remain cautious. The WTO noted that global goods trade growth slowed to 1.2% in 2024, down from 2.7% in 2023, largely due to policy ambiguity.
Tariff Fatigue in Trade Talks: Negotiators Struggle to Balance Geopolitical Concerns with Economic Pragmatism. This has delayed meaningful tariff rollbacks, making the current pause a reprieve rather than a structural shift.
Supply Chain Disruptions Persist
Despite the temporary tariff relief, global supply chains continue to grapple with significant disruptions:
Increased Costs: Tariffs have led to higher prices for raw materials and transportation. For instance, a 15% tariff on steel imports has increased production costs for U.S. manufacturers.zestracapital.com
Rerouting Adds Pressure: Due to tensions in the Red Sea and congestion at Chinese ports, shipping routes have been lengthened. For example, shipping times from China to Europe via the Cape of Good Hope now average 35 days, compared to 25 days previously.
Supplier Diversification Challenges: Businesses attempting to shift their sourcing from China to other regions face higher labor costs and logistical complexities.
No Respite in Lead Times: Data from Logistics Management (2025) shows that over 70% of global supply chain professionals report no improvement in delivery schedules since the pause, largely due to residual tariffs and regional conflicts.
Component Scarcity: Industries such as automotive and electronics continue to be affected. Taiwan’s export of semiconductors fell 8.2% YoY in Q1 2025, squeezing global manufacturing cycles.
Corporate Struggles and Economic Indicators
Increased Operational Costs: A Harvard Business Review report reveals companies are spending an average of 15% more on risk-proofing their supply chains compared to pre-2018 levels.
Delayed Expansion Plans: Firms like Bosch and HP have publicly deferred capacity expansion plans due to uncertainties around sourcing costs and regulatory shifts.
M&A and Consolidation: With input costs rising and profits thinning, sectors such as logistics and specialty chemicals have seen a surge in consolidation, as smaller players struggle to absorb the shocks.
Major corporations are feeling the pinch of ongoing trade uncertainties:
Procter & Gamble (P&G): The company lowered its sales growth outlook, citing challenges in offsetting tariff impacts through pricing and cost reductions.New York Post
PepsiCo: Reported a 2% decline in organic volume after raising product prices by 3%, attributing the downturn to higher supply chain costs and softer consumer demand.
Merck: The company anticipates a $200 million annual impact from existing tariffs.AP News
These examples underscore the broader economic strain caused by persistent trade tensions, even amidst temporary tariff suspensions.
India’s Economic Landscape Amid Global Trade Tensions
India, while somewhat insulated due to its domestic-oriented economy, is not immune to the ripple effects of global trade disruptions:The Times of India
GDP Growth Projections: Moody’s Analytics forecasts India’s GDP growth to slow to 6.4% in 2025, influenced by global economic challenges and regional uncertainties, including the impact of U.S. tariffs.The Economic Times
Currency Volatility: The Reserve Bank of India highlights concerns over global financial market instability, noting risks from disinflation, volatile energy prices, and trade uncertainties.
Supply Chain Realignments: Indian businesses are exploring alternative markets and diversifying supply chains to mitigate risks associated with global trade tensions.KPMG
China+1 Payoff with Caveats: While Apple, Foxconn, and Samsung are scaling up their operations in India, the country still relies on imports for 70% of high-tech components, exposing it to tariff-induced cost escalations.
Rising Input Inflation: With higher freight rates and raw material duties, India’s WPI-based inflation rose to 4.8% in March 2025, up from 3.3% in the same period last year (MOSPI).
PLI Gains Offset by Infrastructure Bottlenecks: India’s PLI schemes have helped attract $20 billion in electronics investments; however, average port turnaround times remain high—3.4 days in India versus 1.2 days in Singapore (World Bank, 2024).
Strategic Responses and the Path Forward
In response to the ongoing challenges, businesses and policymakers are adopting several strategies:
Tariff Simplification Needed: Trade experts urge G20 economies to revisit legacy tariffs that create inefficiencies without delivering a strategic advantage.
Digital Twin Tech: The adoption of AI and digital twin technologies can improve supply chain visibility. India’s logistics sector is piloting blockchain-based traceability solutions through the Unified Logistics Interface Platform (ULIP).
FTAs in Focus: India’s ongoing trade talks with the EU and the UK could eliminate non-tariff barriers worth nearly $10 billion annually, according to estimates from the Commerce Ministry.
Domestic Investment Imperative: The government’s Rs 75,000 crore allocation for logistics parks in Budget 2025 is a step toward modernizing domestic infrastructure, but execution remains key.
Conclusion
The temporary pause in tariffs offers limited relief in the face of deep-seated challenges within global supply chains. Persistent trade tensions, retaliatory measures, and economic uncertainties continue to strain businesses worldwide. For India, proactive strategies and policy reforms are crucial to navigating the complexities of the current global trade landscape and safeguarding economic growth.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
In April 2025, both the International Monetary Fund (IMF) and the World Bank trimmed India’s FY26 growth forecasts. The IMF now pegs it at 6.2%, while the World Bank estimates 6.3%, down from earlier projections of 6.5% and 6.6%, respectively. At first glance, this may appear to be a setback. However, these numbers must be viewed in context, particularly when considering the broader global economic climate and India’s comparative macroeconomic strength.
Despite these cuts, India is still expected to remain the fastest-growing major economy, outpacing China, the US, and Eurozone nations, whose growth projections for 2025-26 range from 1.0% to 4.5%.
Source: IMF & World Bank (FY23–FY26)
What Triggered the Downgrades?
India’s growth outlook has been recalibrated due to a confluence of global and domestic factors. These are not fundamental cracks in the Indian economy but rather reflect near-term uncertainties, especially in the global trade and investment landscape.
1. Tariff Uncertainty and Its Ripple Effect
The specter of rising trade protectionism has returned to the global stage. The IMF, in its April 2025 World Economic Outlook, highlighted that tariff uncertainty is a key reason behind revisions to growth forecasts for economies driven by exports and investment. India, too, has witnessed shifting tariff regimes in recent years, particularly on electronics, electric vehicles (EVs), and critical minerals, as part of its push for Atmanirbhar Bharat (self-reliant India).
While these moves aim to boost domestic manufacturing under schemes like the PLI (Production-Linked Incentive), they’ve also introduced policy unpredictability for multinational corporations considering long-term investments. Several sectors—especially electronics, renewables, and semiconductors—are in a wait-and-watch mode as companies seek more clarity on the direction of trade policies.
2. Private Capex: A Slowing Engine
Goldman Sachs recently noted that private sector capex plans are likely to decelerate in FY26 (Economic Times). While government-led infrastructure investment continues unabated, private investments—especially greenfield projects—are seeing deferments.
In FY25, India saw new project announcements worth over ₹18.5 lakh crore (Centre for Monitoring Indian Economy), but actual execution and capital inflows may taper in FY26 due to macro uncertainty. Companies are also grappling with higher borrowing costs and the lag effects of the RBI’s tightening cycle from 2022 to 2023.
3. Export Weakness Amid Global Headwinds
India’s export engine, particularly in sectors such as textiles, chemicals, and gems and jewelry, has slowed due to subdued global demand. With advanced economies like the EU and Japan flirting with recessionary conditions, India’s merchandise exports contracted by nearly 5.9% in FY25, according to Commerce Ministry data.
Moreover, the disruptions in the Red Sea and continued geopolitical tensions in Eastern Europe and West Asia have impacted shipping costs and delivery timelines, further eroding export competitiveness.
4. Base Effect and Mathematical Normalization
After a post-pandemic rebound in FY22 and FY23, India’s high growth trajectory has been gradually moderating due to the base effect. A lower incremental GDP growth on a higher nominal base is natural, and the current adjustments reflect statistical normalization rather than economic weakness.
In essence, a 6.2–6.3% growth rate on a $4.1 trillion base is not the same as 7% growth on a $2.9 trillion base just five years ago.
India Still Leads the Global Pack
Despite the trimmed forecasts, India is expected to remain the fastest-growing major economy in FY26.
Country
FY26 GDP Forecast (%)
India
6.3
China
4.6
USA
2.1
Euro Area
1.5
Global Avg.
3.2
Sources: IMF World Economic Outlook, April 2025; World Bank
India’s robust performance is driven by strong domestic demand, particularly in consumption and infrastructure spending. As per Statista, private final consumption expenditure (PFCE) accounts for nearly 60% of India’s GDP, providing a natural buffer against external volatility.
Even with these cuts, India remains at the forefront of growth among G20 nations. While China is navigating a housing slowdown and demographic challenges, India’s youthful demographic profile and rising per capita income provide a long runway for sustained demand-led growth.
Domestic Growth Engines Are Still Running
1. Consumption is Strong
Unlike export-reliant economies, India benefits from robust domestic consumption, which accounts for nearly 60% of its GDP. As inflation eases and interest rates stabilize, household spending is expected to revive further. Credit card spending, automobile sales, and air travel volumes have all exceeded pre-COVID highs.
2. Government Infrastructure Push
The Indian government continues to anchor growth via its ₹11.1 lakh crore capital expenditure budget in FY25. Projects in roads, railways, and green energy have multiplier effects on job creation and rural demand. FY26 budget allocations for highways, railways, and energy infrastructure have increased by over 18% YoY, as per data from the Ministry of Finance.
3. Digital and Formal Economy Expansion
UPI transactions reached a monthly value of ₹17 lakh crore (NPCI, March 2025), indicating deeper formalization and financial penetration. India’s digital economy is now a $1.2 trillion ecosystem in terms of market capitalization.
4. Formalization of the Economy: GST collections, which recently touched a record ₹1.78 lakh crore in March 2025, underscore the expanding tax base and ongoing formalization of economic activity.
Rising Services Exports: India’s IT and business services exports remain resilient. According to Statista, India’s IT-BPM export revenue is projected to rise to $254 billion in FY26, up from $200 billion in FY23.
India’s medium-term growth trajectory is promising, but several risks could temper its momentum:
Global Synchronized Slowdown – A broader global economic cooling, especially in key export markets such as the EU, the US, and East Asia, could reduce India’s merchandise and services exports. Prolonged weakness in global trade will impact sectors such as IT, textiles, and automotive components.
Geopolitical Instability – Escalating tensions in the Middle East, the Red Sea, or the Indo-Pacific could spike energy prices and disrupt trade routes, thereby stoking imported inflation and harming India’s external account balance.
Persistent Inflation and Policy Tightening – Food inflation, particularly due to climate disruptions like El Niño, could trigger another round of monetary tightening by the RBI. This would affect borrowing costs and private consumption.
Rural Stress – While urban demand is buoyant, rural India faces stress from erratic monsoons and subdued wage growth. If left unaddressed, it could drag overall consumption.
Credit Cycle Fatigue – With a significant expansion in credit over the last 3 years, banks and NBFCs may turn cautious in FY26, especially in riskier retail and SME lending segments.
Execution Risk in Government Capex – While allocations are high, delays in project execution, land acquisition, or contractor financing could dilute the capex multiplier in the short term.
The Global Context Matters
While downgrades often trigger pessimism, it is essential to consider the broader economic context. A 6.2%–6.3% growth rate for a $4.1 trillion economy like India translates to an incremental output of nearly $260 billion per year, a figure larger than the GDP of many emerging markets.
Furthermore, India’s long-term potential remains intact. A growing middle class, increasing digital penetration, and structural reforms, such as PLI (Production Linked Incentive) schemes and labor code rationalization, provide a strong foundation for the next growth cycle.
Policy Signals Will Be Key
The coming quarters are critical. If the government and central bank can address tariff uncertainties and revive private investment through policy clarity and incentives, India could easily reclaim its 6.5%+ trajectory. The upcoming general elections and fiscal decisions will play a pivotal role in shaping the future.
Growth May Slow, But Momentum Endures
Quarterly GDP numbers do not dictate India’s economic momentum. The broader trend of digital leapfrogging, infrastructure creation, and formalization of consumption remains intact. While global headwinds may slow the pace, India’s fundamentals ensure it doesn’t veer off track.
For investors and businesses alike, the message is clear: India remains the fastest-growing large economy and is likely to continue doing so for the foreseeable future.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
India’s trade deficit with China has surged to an all-time high of $99.2 billion in FY24, up 12% from the previous year, according to official data from the Ministry of Commerce and Industry (Reuters, April 2025). Despite geopolitical tensions, bilateral trade touched $118.4 billion, with imports from China far outstripping exports.
The economic implications of this widening gap are profound—not just for India’s trade policy but for its industrial ambitions, national security, and long-term economic resilience.
Despite the push for self-reliance under the Atmanirbhar Bharat initiative, India remains heavily reliant on Chinese imports for critical inputs across various industries, including electronics, telecom, pharmaceuticals, chemicals, and machinery. For instance, over 75% of India’s active pharmaceutical ingredient (API) needs are met by China (Statista).
India’s exports to China have not kept pace with its imports from China. Even as China remains a top trading partner, India lacks a competitive edge in sectors that matter to Beijing’s supply chains. Primary exports, such as iron ore and cotton, face diminishing returns as China diversifies its suppliers.
3. Dumping Concerns
Indian manufacturers have raised concerns about Chinese firms “dumping” goods at below-cost prices, particularly in the sectors of steel, chemicals, and electronics. This erodes domestic production and makes Indian alternatives uncompetitive.
The Directorate General of Trade Remedies (DGTR) has over 100 ongoing anti-dumping investigations, many of which target Chinese imports (ET Prime).
4. China’s Cost Advantage
China’s economies of scale, advanced logistics, and centralized industrial policy give it a structural cost advantage. India’s fragmented production ecosystem and higher logistics costs (14% of GDP, compared to China’s 8%) widen the competitiveness gap.
The massive outflow of dollars to fund imports from China increases pressure on India’s current account deficit (CAD). In FY24, the CAD was estimated at 1.5% of GDP, with the Chinese deficit making a significant contribution.
2. Impact on Domestic Manufacturing
Cheap imports suppress local manufacturing, particularly for micro and small enterprises (MSMEs). This contradicts India’s ambition of becoming a global manufacturing hub and undermines employment generation in key sectors.
3. National Security Risks
Dependence on a geopolitical rival for strategic sectors, such as semiconductors, telecommunications equipment, and application programming interfaces (APIs), poses national security concerns, particularly given the unresolved border tensions in Ladakh.
What Can India Do?
India cannot afford to close its doors to China, but it must close the capability gap. The approach needs to be multi-layered, involving trade strategy, industrial policy, and diplomatic recalibration.
1. Precision Tariff Strategy, Not Blanket Bans
Blanket bans or large-scale tariffs could harm Indian industries that rely on Chinese inputs.
Instead, India should adopt precision tariffs in sectors where:
Domestic players have the capacity.
Chinese goods are being dumped.
Strategic autonomy is essential, particularly in sectors such as telecom and defense components.
Example: Anti-dumping duties on Chinese aluminum and solar modules have already helped revive domestic competition in those sectors.
2. Turbocharge the PLI Scheme
India has launched ₹2 lakh crore worth of Production Linked Incentive (PLI) schemes across 14 sectors, ranging from electronics and semiconductors to pharmaceuticals and textiles. These need:
Faster disbursement of incentives.
Focus on R&D-driven manufacturing, not just assembly.
India’s mobile exports surpassed $15 billion in FY24, primarily driven by the production of Apple and Samsung devices under the Production Linked Incentive (PLI) scheme. (Source: Invest India)
3. Invest in Critical Supply Chains
India should prioritize API parks, semiconductor fabs, and EV battery ecosystems to plug critical input dependencies.
₹18,000 crore has been allocated for semiconductors, but global giants like TSMC or Intel haven’t committed yet. India must offer better ease of doing business, as well as land and capital assistance.
4. Trade Diplomacy and FTAs
India’s trade strategy should focus on:
Securing duty-free access for Indian goods in markets like the UAE, UK, EU, and Australia.
Leveraging the IPEF (Indo-Pacific Economic Framework) to access alternate suppliers.
Building regional value chains via QUAD or BIMSTEC.
India’s trade with ASEAN reached $131 billion in FY24, showing potential to replace some Chinese imports.
Policy Response: What Needs Urgent Focus
Policy Area
Current Status
Recommendations
Tariff & Anti-Dumping
Over 100 anti-dumping probes are ongoing
Fast-track DGTR enforcement, auto-renewal for chronic sectors
PLI Schemes
Approved but facing implementation delays
Simplify compliance, incentivize capex-linked R&D
Logistics
Costs at 14% of GDP
Target 8% by 2030 via PM Gati Shakti, rail+port digitization
FTAs & Trade Diplomacy
Signed with UAE, ongoing with EU, UK
Prioritize market access in sectors like textiles, pharma, and agri
Link ITIs with local MSMEs, incentivize tech transfer via JV models
Is It Time to Shift from Reactive to Strategic Trade Policy?
India’s record $99.2 billion trade deficit with China is not an isolated failure—it’s a reflection of policy inertia, delayed reforms, and lopsided integration with global trade networks. A mix of targeted protectionism, aggressive domestic industrialization, and trade diversification is needed to reverse the trend.
Rather than wait for another shock, India must act now. The tools exist—execution will decide the outcome.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
When former President Donald Trump re-emerged on the campaign trail with a renewed promise to “weaken the dollar,” it raised eyebrows across global markets. The move is not just political rhetoric; it’s a deliberate economic signal that could alter the direction of global capital, trade balances, and currency dynamics.
A weaker dollar presents a paradox for India: it could boost exports and trigger capital volatility and inflationary pressures. Here’s an in-depth economic analysis of why Trump wants a soft dollar—and how it could impact India.
Why Weaken the Dollar? Trump’s Strategic Economic Play
Trump’s rationale for a weaker dollar is anchored in restoring America’s manufacturing competitiveness. A strong dollar makes U.S. exports expensive and imports cheaper—widening the trade deficit. During his presidency, Trump repeatedly criticized the Federal Reserve for keeping interest rates “too high” and boosting the dollar’s strength.
According to the U.S. Bureau of Economic Analysis, the trade deficit 2023 stood at $773.4 billion, with China accounting for a major share. A weaker dollar could narrow this gap by:
Making U.S. goods cheaper for global buyers
Encouraging domestic production by making imports pricier
Curbing currency manipulation by trade partners
Trump’s proposed policies—including tariffs and potential currency intervention—suggest a return to aggressive “America First” economics. According to CNBC (April 2025), his advisors are reportedly working on a roadmap that includes targeted tariffs and pressure on the Fed to ease policy—both aimed at softening the dollar.
What Drives Dollar Weakness?
Multiple macroeconomic levers influence the value of the U.S. dollar:
Interest Rates: Lower rates reduce demand for dollar assets
Trade Balance: Persistent deficits reduce confidence in the currency
Geopolitics: Sanctions, wars, and trade disputes shift capital flows
Monetary Policy: Dovish signals from the Fed can weaken the greenback
If Trump returns to the White House and enacts his agenda, it could mirror the weakening of 2020-style currency. During that year, the Dollar Index (DXY) dropped by nearly 10%, driven by low rates and pandemic-era stimulus.
India’s Trade Sector: Opportunity in Disguise?
Export-Led Growth Could Get a Boost
A weaker dollar, relative to the rupee, increases the purchasing power of U.S. buyers for Indian goods and services. For a country like India—where exports account for around 21% of GDP—this can be a significant tailwind.
More specifically:
IT services, which brought in $268 billion in FY24 (NASSCOM), could see an uptick in contracts as U.S. firms outsource more to cut costs amid domestic inflation.
Pharmaceutical exports, valued at $27 billion, might gain market share in the U.S. generics space, where price sensitivity is high.
Textiles and garments, which have been under pressure from low-cost Southeast Asian competitors, may regain competitiveness if the rupee remains stable while those currencies appreciate against the dollar.
Additionally, the falling dollar can revive stalled trade talks between India and the U.S. as American firms look to diversify sourcing amid Trump’s tougher stance on Chinese imports. This opens doors for B2B industrial goods, semiconductors, and green energy components—sectors where India has recently ramped up capacity.
However, the opportunity is highly sensitive to currency stability. If the RBI intervenes to prevent rupee appreciation (to keep exports competitive), it could impact India’s external account surplus or trigger inflation via higher liquidity.
Challenge: Capital Outflows and Rupee Pressure
While a weaker dollar helps Indian exporters, it can destabilize India’s capital markets and exchange rate stability, particularly in interest rate differentials and safe-haven flows.
Here’s how:
If the U.S. Federal Reserve begins cutting interest rates (either due to policy or political pressure from Trump), U.S. Treasury yields fall. This reduces the attractiveness of dollar assets but doesn’t guarantee flows to EMs like India unless global risk appetite remains high.
In periods of global uncertainty (e.g., trade tensions, Middle East conflict, or China slowdown), investors may still prefer U.S. assets—even with low yields—due to their “haven” status.
This creates a contradictory setup: capital could exit India even as the dollar weakens, especially if India’s macro fundamentals are under strain (e.g., widening fiscal deficit, rising crude oil import bill).
In Q1 of 2024, for example, despite the Dollar Index declining from 105 to 101, India saw FII net outflows of ₹58,000 crore, as per NSDL data—due to inflation concerns and rate cut delays by the RBI.
Also, a weaker dollar typically raises global commodity prices, including oil, gold, and industrial metals, as these are priced in dollars. For India, which imports over 85% of its crude oil, this directly worsens the current account and fuels domestic inflation—already sticky at around 5% CPI in 2024.
Variable
Mechanism
Expected Impact on India
Dollar depreciation
Boosts global commodity prices
Higher import bill, especially crude and gold
U.S. rate cuts
Narrows rate differentials with India
FII outflows from Indian bonds and equities
INR appreciation
It makes exports less competitive, lowers imported inflation
Mixed—positive for importers, negative for exporters
Capital outflows
Triggered by global uncertainty or EM risk aversion
Weakens rupee, raises yields
External commercial borrowings
It becomes cheaper in dollar terms
Opportunity for Indian corporates to refinance
Source: RBI, Ministry of Finance, Bloomberg, April 2025
India’s Long-Term Play: Shift in Global Supply Chains
India’s longer-term opportunity lies in trade dynamics and capital allocation realignment. If Trump’s return triggers another China-centric trade war, global firms—especially from the U.S.—will look to hedge their supply chains by investing elsewhere.
India, with:
A large domestic market
Stable political climate
Structural reforms like GST, IBC, and digitization
Incentive-led manufacturing programs (PLI)
…is uniquely positioned to absorb a chunk of the $1.4 trillion global capex realignment projected over the next 5 years (World Bank estimate, 2024).
More evidence: Apple and Tesla’s recent moves to expand manufacturing in India indicate that this trend is already underway. A Trump-led dollar weakening and tariff walls against China would only accelerate this shift.
Further, the rupee’s relative stability could enhance India’s perception as a currency-safe destination. From 2020 to 2024, the INR depreciated only 5.2%, compared to Vietnam’s dong (11.3%) and Turkish lira (48%)—according to RBI and IMF data. This currency stability becomes a strategic asset in global boardrooms.
Global Perspective: A Currency Reset in Motion?
Beyond bilateral dynamics, Trump’s push for a weaker dollar feeds into a broader global monetary shift. The dollar’s share in global reserves is declining—from 71% in 1999 to 58.4% in 2023 (IMF).
The U.S. dollar’s dominance in global reserves has declined from over 70% in 1999 to around 58.4% in 2023. Meanwhile, other currencies—especially the euro and emerging ones like the yuan—are gaining traction.
Gold and commodity-backed currencies are gaining ground as hedges.
Countries like China, Russia, Brazil, and UAE are increasingly conducting trade in non-dollar terms—raising the prospect of a multi-polar reserve system.
If Trump’s policies lead to faster dollar depreciation, it may erode the dollar’s centrality in global finance, further pushing investors and sovereigns toward diversification. India, which has recently signed rupee-settlement agreements with several nations, including UAE and Sri Lanka, could ride this wave to reduce dollar dependence.
High-Risk, High-Reward Game for India
India stands at a strategic juncture. A weakening dollar—while carrying short-term volatility—offers a rare window to:
Boost exports
Attract reallocated global capital.
Enhance manufacturing competitiveness
Reduce dollar-dependence in trade.
But to convert this into sustained growth, India must:
Manage currency and inflation risks deftly
Accelerate reforms to improve ease of doing business.
Ensure macro stability to maintain investor confidence.
In economic terms, Trump’s “weak dollar” campaign is not just U.S. policy—it’s a global variable. For India, should we prepare to cope or capitalize?
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
As global trade experiences turbulence amid rising protectionism, the India-UAE relationship emerges as a beacon of opportunity. The resurgence of tariff-driven policies, especially under the potential return of Donald Trump to the U.S. presidency, threatens to realign global trade dynamics. In this context, India and the United Arab Emirates (UAE), both fast-growing economies with shared strategic goals, are uniquely positioned to mitigate external risks and amplify bilateral cooperation across trade, technology, energy, and innovation.
This strategic partnership has evolved well beyond oil. From $180 million in bilateral trade in the 1970s to over $84.5 billion in FY2023 (Statista), the depth and diversity of India-UAE trade underscore the scale of mutual trust and economic alignment.
India-UAE Economic Ties History
Established in 1972, the India-UAE diplomatic relationship has become one of India’s most significant strategic and economic alliances. The UAE is now India’s third-largest trading partner and second-largest export destination, surpassing traditional trade destinations like the EU and Southeast Asia.
The Comprehensive Economic PartnershipAgreement (CEPA) launch in May 2022 marked a key inflection point. This landmark deal aims to boost trade to $100 billion within five years, offering Indian exporters duty-free access to over 90% of UAE tariff lines, particularly in high-growth sectors like textiles, pharmaceuticals, gems and jewelry, and food products (Ministry of Commerce).
Crucially, the UAE’s investments in India go beyond trade. The Abu Dhabi Investment Authority (ADIA) and Mubadala have invested significantly in India’s digital infrastructure (e.g., Reliance Jio), renewable energy (e.g., ReNew Power), and logistics.
Speaking recently at the World Governments Summit in Dubai, UAE Parliamentarian Dr. Ali Rashid Al Nuaimi stated that the ongoing U.S. tariff regime could become a “golden opportunity” for India and the UAE to expand bilateral trade and insulate against global disruptions (ANI News).
If Trump returns to the White House and revives steep tariffs—especially against China and possibly the EU—it may open new trade corridors. With its sophisticated logistics infrastructure (like Jebel Ali Port), the UAE can be a vital transit hub for Indian goods heading to Africa and Europe.
2. Converging Economic Visions
Both nations are navigating economic transitions:
India aims for a $5 trillion GDP by FY2027, driven by Make in India, Digital India, and Production Linked Incentive (PLI) schemes.
UAE is implementing Vision 2030, focusing on diversifying its economy away from hydrocarbons toward technology, tourism, and green energy.
This shared pivot creates synergy in sectors like EVs, green hydrogen, fintech, logistics, and space technology.
Economic Benefits of Strengthening Ties
Benefit
India
UAE
Export Market Diversification
Reduced Western reliance
Access to India’s consumer and industrial markets
Investment Flow
FDI from UAE in infrastructure, energy, and tech
Stakes in India’s unicorn/start-up ecosystem
Labour & Remittances
$18 billion in remittances from the UAE annually
Skilled labor and knowledge workforce from India
Logistics & Trade Access
Entry point to Africa via UAE ports
Gateway to South Asia via India
The CEPA Impact So Far
According to a report in The Economic Times, exports under CEPA rose by 11% in 2023, with notable performance in sectors like gems & jewelry, pharma, and textiles. The agreement also introduced:
Digital customs clearance to reduce processing time.
Preferential access for UAE companies is available in Indian government contracts.
Facilitated business visa approvals and joint innovation funds
Both governments are now discussing 2 CEPAs, which may cover e-commerce, digital trade, and fintech regulation alignment (Republic World).
Challenges and Risks Ahead
1. Geopolitical Instability
UAE’s proximity to regional conflicts (Iran, Yemen) and India’s balancing of ties with the West, Russia, and the Middle East could create diplomatic friction.
2. Currency Volatility
Over 85% of trade settlements are in USD, increasing forex risk. The push to allow INR-AED transactions needs institutional backing and central bank cooperation.
3. Regulatory and Data Challenges
While CEPA reduces tariffs, non-tariff barriers and lack of regulatory alignment in areas like data localization, digital identity, and cybersecurity remain.
4. Global Economic Headwinds
A synchronized global slowdown or new wave of inflation could pressure domestic consumption in both countries, slowing trade momentum.
5.Protectionist Drift Elsewhere
If the global economic slowdown accelerates, protectionist policies in other markets could spill over, affecting India-UAE trade routes indirectly.
Strategic Next Steps
1. Promote INR-AED Trade Mechanisms
This will hedge against USD volatility, reduce transaction costs, and foster financial sovereignty.
2. Institutionalize Sectoral Councils
Task forces on green energy, AI, healthtech, and quantum computing can create joint R&D and venture funding platforms.
3. Joint Ventures in Africa
India’s pharma and agri-tech, combined with UAE’s capital and logistics, can unlock African markets worth over $600 billion by 2030 (AfDB).
4. Expand Cultural and Tech Diplomacy
India can leverage its large diaspora (3.5 million in UAE) to push soft power and tech exports in digital education, skilling, and digital public infrastructure.
Conclusion: Seizing the Strategic Moment
The India-UAE partnership is no longer transactional — it’s transformational. With CEPA acting as a springboard and global trade realigning amid protectionism, both nations have a rare chance to shape a new economic architecture for the Global South.
As Dr. Al Nuaimi rightly noted, “this is the right time for both nations to invest in each other” (The Week). By acting with urgency and vision, India and the UAE can redefine bilateral success and global economic leadership in an era of uncertainty.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
With geopolitical tensions and global trade dynamics shifting rapidly, India and the United States are working against the clock to finalize a partial bilateral trade agreement. The goal? To cement progress before the 90-day pause on reciprocal tariffs—announced by former US President Donald Trump and recently revived under ongoing negotiations—expires.
According to senior government officials, the trade pact aims to address three key focus areas: tariff reductions, digital trade facilitation, and expanded market access. While not as comprehensive as a full free trade agreement (FTA), this partial deal could lay the groundwork for future economic collaboration, especially as India navigates a multipolar global order and the US counters China’s influence in Asia.
What Is a Partial Bilateral Trade Deal?
A partial bilateral trade agreement is a focused pact between countries that covers specific sectors or issues, unlike a full FTA, which encompasses a broader spectrum of trade and investment rules. This deal is often pursued when time is limited or when a full FTA is politically or administratively infeasible.
In this case, the 90-day pause is a strategic window to resolve trade frictions that have plagued Indo-US relations over the past few years. The pause was initiated in light of Trump-era tariffs and retaliations—particularly those under Section 232 (steel and aluminium) and Section 301 (digital services tax and e-commerce). Source:Business Standard
Why Now? The Strategic Importance of the 90-Day Window
This narrow window comes at a critical time. According to Statista, US-India bilateral trade in goods was valued at $131 billion in 2023, making the US India’s largest trading partner. However, trade imbalances and tariff-related tensions have been persistent issues.
Year
US-India Trade Volume (in $B)
2019
92.1
2021
112.6
2023
131
Data Source: Statista
The Three Fronts India Will Focus On
1. Tariff Reductions on Key Sectors
India is pushing for tariff concessions, particularly on exports such as textiles, pharmaceuticals, leather, and engineering goods. The US, in turn, is interested in reducing duties on high-end tech products, renewable energy components, and agricultural exports like almonds and apples.
For example:
Almonds: India currently imposes a tariff of ₹120/kg on US almonds.
Medical Devices: The US seeks the removal of India’s price caps on stents and knee implants. Source: News18
2. Digital Trade & E-Commerce Regulations
Digital trade remains a sticky point, especially around data localization and India’s evolving stance on digital sovereignty. The US is keen to ensure that cross-border data flow rules align with global norms and not disadvantage American tech giants like Amazon, Google, and Meta.
India, meanwhile, is cautious, wanting to protect domestic digital infrastructure and the interests of local startups.
The Indian e-commerce market is projected to reach $188 billion by 2025 (Source: IBEF).
The US wants fewer barriers to digital payments, cloud computing, and fintech operations. Source:Moneycontrol
3. Expanded Market Access for Both Sides
India also aims for smoother access to the US market for its agricultural goods, textiles, and auto components. In return, the US pushes for broader access to India’s service sector, particularly financial services and education.
The proposed deal may revive discussions around reinstating India’s eligibility under the US Generalized System of Preferences (GSP), which allowed duty-free entry for $5.6 billion worth of Indian goods until its withdrawal in 2019.
India’s Exports to the US (2023): $78 billion
US Exports to India (2023): $53 billion (Source: USTR, 2024)
What’s at Stake Economically (Expanded)
A successful partial trade agreement between India and the US could be more than symbolic—it could have real economic consequences for GDP growth, trade diversification, and supply chain resilience.
1. Boost to India’s Export Competitiveness
India’s exports to the US stood at $78 billion in 2023, accounting for nearly 18% of its total exports. However, high US tariffs and the removal of India from the Generalized System of Preferences (GSP) in 2019 hurt competitiveness in sectors like textiles, gems and jewelry, and leather.
If GSP benefits are reinstated or tariff reductions are agreed upon:
Indian exports could rise by $8–10 billion annually, based on industry estimates from FIEO (Federation of Indian Export Organisations).
This could translate into a 0.25% boost to India’s GDP, particularly from MSME-driven export sectors that were previously GSP beneficiaries.
2. Realignment of Global Supply Chains
With the US decoupling from China and looking for alternative partners, India has a strategic opportunity to become a reliable supply chain node. According to a 2024 McKinsey Global Institute report, 15–20% of global trade could shift from China to other Asian economies by 2030. With its vast labor force and improving infrastructure, India is a natural candidate—provided trade barriers are reduced.
A smoother trade framework with the US could:
Accelerate FDI inflows in manufacturing (PLI-linked sectors like electronics and pharma).
Encourage American firms to consider India over Vietnam or Mexico for high-value production and R&D.
3. Digital Economy Integration
India’s digital economy is projected to hit $1 trillion by 2030 (MeitY estimate). US tech firms are deeply invested—Amazon has committed over $26 billion in India, while Google and Microsoft are expanding cloud and AI infrastructure.
If digital trade norms are harmonized:
India could attract more tech FDI, particularly in SaaS, AI, and fintech.
UPI and RuPay could be integrated with US systems, enabling smoother cross-border payments.
However, without alignment on data governance, taxation, and localization, these benefits could remain unrealized.
Challenges Ahead (Expanded)
While negotiators are racing against time, several entrenched obstacles could derail or dilute the scope of the agreement.
1. Data Sovereignty vs Free Digital Trade
The US strongly opposes India’s data localization policies, which require companies to store certain data domestically. These policies are part of India’s broader goal of securing its digital infrastructure and encouraging domestic cloud development. However, they clash with US digital trade principles, which advocate unrestricted cross-border data flows.
The US fears that India’s policies could set a precedent for digital protectionism globally. India, meanwhile, cites privacy, national security, and local job creation as key reasons for its stance. Unless a middle ground is found—perhaps through carve-outs or sector-specific rules—digital trade provisions could remain unresolved.
The US is pushing for greater access to India’s large consumer market for dairy, poultry, and agricultural products. But:
India has long protected its dairy sector, citing livelihood concerns for 80 million farmers, most of whom operate on a subsistence level. US demands to ease restrictions on genetically modified (GM) foods and hormone-treated meat also face strong domestic opposition.
These are politically sensitive areas, especially with Indian elections on the horizon, making broad agricultural concessions unlikely.
3. Pharma & Medical Devices Pricing
The US pharmaceutical and medical device lobbies urge India to relax price controls on products like cardiac stents and knee implants. India’s National Pharmaceutical Pricing Authority (NPPA) caps prices to make healthcare more affordable for its population.
However, a rollback on price controls could spark public backlash in India. While American manufacturers see it as a necessary market reform, India sees price regulation as a public health imperative.
4. Labor and Environmental Standards
Future phases of the deal—if not the current partial version—may include US-style labor and environmental standards. Indian exporters, especially MSMEs, fear such clauses would increase compliance costs and reduce competitiveness.
In particular:
Textile and apparel exporters fear losing cost advantages.
Small manufacturers lack the infrastructure to meet complex audit and reporting norms.
These issues could become bigger sticking points in a full-fledged FTA.
5. Geopolitical and Electoral Timing
The 90-day window overlaps with an election-heavy calendar in both countries. India is heading into key state polls, and the US is preparing for its 2024 Presidential election cycle. This creates a narrow bandwidth for political risk:
A change in US administration could stall or reverse negotiations. In India, any perception of ceding economic ground to foreign players could be politically costly.
6. Lack of Dispute Settlement Mechanism
Unlike FTAs, partial trade deals often lack a formal dispute resolution framework, increasing uncertainty. If either side reneges on commitments or interprets terms differently, enforcement becomes difficult without a WTO-like mechanism or arbitration clause.
Challenges Ahead
While optimism is high, hurdles remain:
India’s data protection laws and pricing controls on medical devices are potential deal-breakers.
The US will unlikely reintroduce GSP without structural reforms in India’s tariff policy.
The global political environment—especially with US elections looming—adds unpredictability.
Still, negotiators are hopeful that a narrowly defined, economically beneficial pact can be reached within the deadline.
Final Thoughts
India’s pursuit of a partial bilateral trade deal with the US underlines a larger strategic pivot—towards trade pragmatism and global competitiveness. Economic diplomacy is becoming just as crucial as military alliances in a multipolar world. A successful outcome will ease long-standing irritants and prepare the ground for a more comprehensive agreement.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
When Donald Trump floated the idea of a 10% universal import tariff—and as much as 60% on Chinese goods—it wasn’t just a campaign headline. It reopened a long-standing debate: can aggressive protectionism trigger the next global recession?
With inflation still sticky, monetary policy stretched, and geopolitical tensions high, this is more than a U.S. election-year stunt. It’s a policy shift with global consequences. To unpack whether tariffs will push economies into recession, we must understand the transmission mechanisms—from price levels and investment behavior to currency shocks and global demand.
Tariffs: A Tax with Long Tails
Tariffs are often portrayed as a tool to protect domestic industry. But economically, they are regressive taxes. They raise the cost of imported goods, which then filters into:
Consumer prices (higher inflation)
Corporate margins (especially for firms relying on global supply chains)
According to the Tax Foundation, a 10% universal tariff would mean a $300 billiontax increase for U.S. consumers over 10 years. That’s more than the annual GDP of countries like Portugal or New Zealand.
Moreover, as per the Federal Reserve Bank of New York, tariffs during the 2018–2019 U.S.-China trade war raised input costs for manufacturers by 8%, contributing to a significant slowdown in factory orders and capital expenditure.
Could It Tip the U.S. Into Recession?
A U.S. recession isn’t a theoretical possibility—it’s a statistical probability if tariffs rise drastically in an already fragile macro environment.
Here’s how the dominoes may fall:
Higher Prices = Delayed Rate Cuts According to Oxford Economics, a 10% import tariff is expected to add 1.8 to 2 percentagepoints toinflation. This may force the Federal Reserve to hold interest rates above 5% well into 2026, suppressing consumption and borrowing.
Demand Shock + Investment Freeze With higher prices and interest rates, household spending and corporate investment would decline. As of Q1 2025, actual personal consumption is already slowing, growing at just 1.2% YoY, down from 2.7% a year ago.
Trade Retaliation and Global Rebalancing The EU and China have already hinted at reciprocal tariffs. This reduces demand for U.S. exports, leading to a drop in production, especially in industrial and agri-export hubs like the Midwest.
Unemployment Creeps Up Manufacturing job growth in the U.S. is already stalling—March 2025 added only 5,000 manufacturing jobs, down from a monthly average of 18,000 in 2023. With rising input costs, job cuts may follow.
The U.S. economy is walking a tightrope, and broad tariffs could tip the balance.
The Global Fallout: Who’s Most Vulnerable?
1. China
Trump’s proposed 60% tariff on Chinese goods would further destabilize China’s export sector, which already saw a 6.5% YoY drop in shipments to the U.S. in 2024. The shock would weaken the yuan, trigger capital flight, and potentially force Beijing to boost fiscal stimulus.
Export-to-GDP Ratio (China): 21% (Statista)
% of Exports to the U.S.: ~17%
2. Germany & the EU
Germany, Europe’s manufacturing engine, exports nearly 50% of its GDP. If global demand weakens, the eurozone may slide into recession again following 2023’s near-zero growth. Sectors like autos and machinery would be hit hard.
Germany’s Exports to the U.S.: ~$157 billion (2024)
Dependency on global demand: Extremely high due to low domestic consumption.
3. Southeast Asia & Mexico
Vietnam, Taiwan, and Mexico are key parts of global supply chains. For instance, Vietnam sends 28% of its total exports to the U.S. A slowdown in U.S. demand would ripple into factory closures and currency volatility.
Source: Statista, World Bank, WTO Trade Data
4. Commodity Exporters
Tariff-driven demand slowdown in industrial nations would also reduce demand for commodities. Countries like Brazil (soybeans), Australia (iron ore), and South Africa (metals) may face lower prices and revenue shortfalls.
Is This 2018 All Over Again?
In many ways, no. The macro backdrop today is more fragile. Global interest rates were near zero during the 2018-2019 trade war. Central banks had room to cut. Today, most are already in tightening or neutral mode. It limits monetary flexibility to cushion the blow.
Also, corporate balance sheets are more fragile, especially in China and Europe. Global corporate debt as a percentage of GDP rose 102% in 2024, up from 89% in 2019.
Is India Vulnerable to a Global Recession?
Yes, but with caveats. India is not immune to a global recession but is better insulated than many other emerging markets.
Here’s why:
Factors That Shield India
Domestic Demand-Driven Economy Unlike export-heavy nations (like Vietnam or Germany), India’s GDP is driven ~60% by domestic consumption, which acts as a buffer.
Services Resilience India’s IT and business services sector (~8% of GDP) remains globally competitive and essential, even in downturns. Many global firms outsource more during recessions to cut costs, which benefits India.
Healthy Forex Reserves As of March 2025, India has $640 billion in forex reserves, giving it room to manage currency volatility and imports.
Macroeconomic Management Inflation, while sticky, has been moderating. The RBI has built credibility in balancing growth and inflation, and fiscal policy is relatively conservative compared to peers.
Risks and Vulnerabilities
Export Exposure to the U.S. & EU While exports are only ~20% of India’s GDP, the U.S. and EU account for 30% of India’s total exports. A slowdown there would hit sectors like textiles, engineering goods, and software services.
Oil Prices and Capital Flows In a global slowdown, oil prices might initially fall, but if geopolitical tensions rise (say, in the Middle East), prices may spike, hurting India’s import bill. Also, FII outflows often increase during global stress.
Unemployment & Informal Sector Stress A global slowdown can impact job creation, especially in export-oriented SMEs and gig economy sectors. This could widen income inequality.
Economic Consequences of a Global Recession
A full-blown global recession can create first-order and second-order effects:
Consequences
Impact
Demand Contraction
Reduced sales for exports, lower revenues
Investment Freeze
Delay in FDI, private sector capex cuts
Employment Stress
Job losses in trade-exposed and IT sectors
Fiscal Strain
Government spending may rise to support jobs
Credit Risks
Defaults may rise in MSME and retail loans
Currency Volatility
INR depreciation due to capital outflows
Is There a Silver Lining to a Recession?
Yes. Recessions, while painful, can reset imbalances and offer structural opportunities. Here’s how:
1. India as an Alternative to China
Global firms seeking “China Plus One” diversification may accelerate supply chain moves to India, especially in electronics, pharmaceuticals, and renewable energy. For instance:
Apple now assembles 12–14% of its iPhones in India (Source: Bloomberg, 2025).
India’s PLI (Production Linked Incentive) schemes could attract more investment during shifts.
2. Lower Global Commodity Prices
A global recession typically reduces demand for oil, metals, and agri-products. For India, which imports over 80% of its crude, this means lower inflation and improved trade balance—freeing up space for fiscal support or rate cuts.
3. Tech & Talent Outsourcing Boom
As global companies cut costs, India’s tech services may see a surge in demand. During the 2008 recession, Indian IT firms like TCS and Infosys grew faster than the global average.
4. Policy Reforms Under Pressure
Recessions often force governments to act boldly. India may push forward:
Labor market reforms
Infrastructure investment
Trade diversification
Easing compliance for MSMEs
What Can Be Done to Avoid a Recession?
Targeted Tariffs, Not Blanket Measures Instead of a universal tariff, a nuanced approach focusing on strategic goods (e.g., EVs, semiconductors) could protect domestic interests without stoking a global shock.
Supply Chain Diversification For businesses, shifting procurement to India, Indonesia, or Latin America could help reduce dependence on tariff-prone geographies. The “China Plus One” strategy is gaining ground.
International Trade Coordination Platforms like the WTO, G7, and APEC must play a bigger role in mediating disputes. The world can’t afford another full-blown trade war.
Fiscal Policy Readiness Governments must keep fiscal stimulus tools ready—especially in export-reliant nations. Support to vulnerable sectors and households could soften the landing.
Tariffs, Recession, and Risk Multipliers
Trade policy is not made in a vacuum. In 2025, the world is still absorbing the aftershocks of a pandemic, a war in Eastern Europe, and tight monetary policy. Trump’s tariff ambitions may offer political dividends—but economically, they risk pushing the U.S. and the world toward a recession.
If protectionist policies gain traction without complementary buffers—such as diplomacy, diversification, and smart monetary coordination—the odds of a global downturn increase sharply.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
The USD has traditionally been regarded as a safe-haven currency, underpinned by the belief in the U.S. economy’s resilience and dynamism—a concept known as “U.S. exceptionalism.” However, this narrative is being challenged as investors reassess the country’s economic policies and global ramifications. The USD is experiencing its worst start since the 2008 financial crisis, leading to gains in emerging market currencies like the Russian ruble.
In light of the recent shifts in financial markets and the U.S. dollar’s trajectory, providing a visual representation can enhance understanding. Below is a summary of key data points illustrating these trends:
U.S. Dollar Index (DXY) and Gold Prices: January 2024 – March 2025
In the table above, the U.S. Dollar Index (DXY) experienced a steady increase throughout 2024, peaking at 108.0 in December. However, a reversal began in 2025, with the index declining to 105.0 by March.
Gold prices, however, showed a consistent upward trend, culminating in a significant surge to over $3,100 per ounce in March 2025. This increase is attributed to investor concerns over impending U.S. tariffs and geopolitical uncertainties. nypost.com+ Reuters
This inverse relationship between the U.S. dollar and gold prices underscores the market’s response to economic policies and global events, highlighting the importance of diversification and vigilance in investment strategies.
Factors Contributing to the Shift
Several key developments have contributed to this reassessment:
Trade Policies and Tariffs: The Trump administration’s implementation of significant tariffs on major trading partners, including China, Canada, and the European Union, has heightened global trade tensions. These measures, described by President Trump as “reciprocal tariffs,” are intended to address trade imbalances but have led to fears of a global trade war. Goldman Sachs predicts a 15-percentage-point rise in U.S. tariffs this year, which could increase inflation by half a percentage point and raise the probability of a recession to 35%. Financial Times+1Business Insider+1
Global Economic Performance: While the global economy grew by 3.3% in 2024, the U.S. faces challenges due to its trade policies. The euro area remains weak, with Germany experiencing economic contraction, and Japan maintains resilience despite tighter monetary policies. Emerging markets present a mixed performance, with Mexico’s growth slowing, whereas Brazil and India continue to demonstrate strong economic momentum.
Market Volatility: The first quarter of 2025 has been marked by significant volatility in global markets due to the return of Donald Trump as U.S. President. Key movements include a substantial rise in gold prices, reaching their best quarter since 1986, driven by trade wars. The U.S. tech giants, known as the ‘Magnificent Seven,’ have lost nearly $2 trillion, outpaced by Chinese tech firms and European defense companies. Reuters
Implications for Global Growth
The reversal in the USD’s trajectory and the underlying factors have several implications:
Emerging Markets: A weaker USD can benefit emerging markets by making their exports more competitive and easing the burden of dollar-denominated debt. However, the broader uncertainty and potential for retaliatory trade measures may offset these advantages.
Global Trade Dynamics: The shift away from U.S. exceptionalism prompts investors to explore opportunities in other markets, potentially leading to a reallocation of capital and a more multipolar global financial landscape. European stocks, for instance, have outperformed U.S. stocks by nearly 11 percentage points in the first quarter of 2025, marking a historic outperformance. MarketWatch
Inflationary Pressures: Tariffs and trade barriers can lead to increased costs for imported goods, contributing to inflation. Goldman Sachs projects inflation to rise to 3.5%, complicating the Federal Reserve’s efforts to balance growth and price stability. Business Insider
What Can Investors Expect in Such a Scenario?
For investors, the weakening U.S. dollar and the broader shift in financial market perceptions present risks and opportunities. A depreciating USD often benefits commodities like gold and oil, which are priced in dollars, making them more attractive to foreign buyers. Historically, gold has surged during periods of dollar weakness, and this trend is playing out again, with prices up 16% year-to-date—the best quarterly performance since 1986 (Reuters).
Additionally, emerging markets tend to perform well in such environments, as a weaker dollar reduces debt-servicing costs for countries with dollar-denominated debt. The MSCI Emerging Markets Index rose 8.5% in Q1 2025, outpacing U.S. equities. However, investors should be cautious about inflationary risks from tariff policies, which could lead to higher interest rates and reduced corporate earnings. In equities, European and Asian markets are showing stronger performance than the U.S., signaling a possible shift in global capital flows (FT).
For portfolio diversification, investors should consider increasing exposure to non-U.S. equities, gold, and emerging market bonds while staying alert to inflation trends and potential policy changes from central banks.
Conclusion
The financial markets’ reassessment of U.S. exceptionalism and the consequent U-turn in the USD underscores the intricate interplay between economic policies and market perceptions. As the global economy navigates these shifts, stakeholders must remain vigilant and adaptable to the evolving financial landscape.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
Get answers to the most pertinent questions on your mind now.
[faq_listing]
What is an Investment Advisory Firm?
An investment advisory firm is a company that helps investors make decisions about buying and selling securities (like stocks) in exchange for a fee. They can advise clients directly or provide advisory reports and other publications about specific securities, such as high growth stock recommendations. Some firms use both methods, like Research & Ranking, India’s leading stock advisory company, specializing in smart investments and long-term stocks since 2015.
Do we have SEBI registration as an Investment Advisory?
An investment advisory firm is a company that helps investors make decisions about buying and selling securities (like stocks) in exchange for a fee. They can advise clients directly or provide advisory reports and other publications about specific securities, such as high growth stock recommendations. Some firms use both methods, like Research & Ranking, India’s leading stock advisory company, specializing in smart investments and long-term stocks since 2015.
Why choose a SEBI Registered Investment Advisor?
An investment advisory firm is a company that helps investors make decisions about buying and selling securities (like stocks) in exchange for a fee. They can advise clients directly or provide advisory reports and other publications about specific securities, such as high growth stock recommendations. Some firms use both methods, like Research & Ranking, India’s leading stock advisory company, specializing in smart investments and long-term stocks since 2015.
What is the Role of an Investment/Stock Market Advisory Firm in India?
An investment advisory firm is a company that helps investors make decisions about buying and selling securities (like stocks) in exchange for a fee. They can advise clients directly or provide advisory reports and other publications about specific securities, such as high growth stock recommendations. Some firms use both methods, like Research & Ranking, India’s leading stock advisory company, specializing in smart investments and long-term stocks since 2015.
Is investment advisory the same as wealth management?
