As concerns mount over a potential global economic slowdown, experts caution that it is too early to predict a full-scale recession. A key factor driving these fears is the United States’ plan to impose higher tariffs on imports, a move that could significantly impact global trade, supply chains, and economic growth.
Global Trade and Inflation Risks
According to Madan Sabnavis, Chief Economist at Bank of Baroda, these tariffs could disrupt inflation trends and slow down the easing policies of central banks worldwide. While most central banks are focusing on stimulating growth through interest rate cuts, a tariff-induced trade slowdown could derail these efforts.
“Countries more dependent on exports will face challenges as their growth will be affected. India, being a domestic-oriented economy, will be buffered to a large extent, though it will still be impacted by sharp currency volatility,” Sabnavis noted.
Impact of Tariff Disruptions on Global Growth
Ajay Bagga, a banking and global markets expert, warned that widespread trade disruptions could have severe consequences, potentially tipping some regions into negative growth.
“In today’s interconnected economy, production chains span multiple countries, making them highly sensitive to trade restrictions. Raw materials sourced from one country may be processed in another and assembled elsewhere. Any disruption could ripple across the global economy,” Bagga explained.
He pointed to the Atlanta Fed GDP Now forecast, which estimates negative growth of -2.4% for the U.S. in Q1 2025, signaling the potential economic strain from increased tariffs.
India’s Relative Resilience Amid Global Uncertainty
Despite rising global uncertainty, economists believe that India may be relatively shielded from the worst effects of a global slowdown. As a domestic-driven economy, India is less dependent on exports compared to many other nations.
However, Sabnavis cautioned that India is not entirely immune to global economic shifts.
“The rupee could face significant volatility due to global market uncertainties, posing challenges for businesses engaged in international trade,” he added.
Outlook for the Global Economy and India
While it remains uncertain whether the world will slip into a full-blown recession, the risks are growing. If the U.S. tariffs take effect in April as planned, they could further slow global economic momentum.
For India, the domestic market’s strength may help mitigate major economic shocks, but the country will still need to navigate currency fluctuations and heightened global uncertainty in the months ahead.
