The U.S. economy is slowing, with 2024 GDP growth at 2.8%. Tariffs imposed by President Trump have initiated a trade war, impacting global trade and economic stability. India risks falling short of its growth target due to reduced exports and a declining U.S. economy projecting a further contraction. The overall implication is a complicated global economic landscape requiring strategic adjustments, particularly for export-dependent countries like India.
Recent indications show that the U.S. economy is experiencing a slowdown, exacerbated by President Donald Trump’s contentious policies, particularly the imposition of import tariffs. The U.S. GDP growth for 2024 stands at 2.8%, slightly below the 2.9% recorded in 2023. The initial quarter of 2024 displayed a mere 1.6% growth rate, the lowest since Q3 of 2022, before recovering in Q2 and Q3 but declining again to 2.3% in Q4 due to reductions in private investment and exports. The primary contributors to growth this year have been robust consumer and government spending.
In an effort to protect domestic markets, President Trump enacted substantial tariffs early in his administration. A 25% tariff on imports from Canada and Mexico, the United States’ largest trade partners, was implemented, accompanied by additional 10% tariffs on Chinese products. The tariffs came into effect in early March 2024, igniting a trade conflict as affected countries retaliated, thus establishing a trade war that could hinder global economic relationships.
The House of Representatives has not proposed new tax cuts to stimulate spending; however, Trump has pledged to share some savings from government efficiency measures with the American populace while addressing national debt. It remains uncertain whether the anticipated savings of $2 trillion are attainable given current commitments in the budget, which totals around $7 trillion.
Economic forecasts suggest the possibility of a contraction in U.S. GDP by 1.5% in the first quarter of 2025, attributed to reduced consumer spending and weak private investments. Specific declines in consumer spending, which constitutes over two-thirds of the GDP, have been noted, with January reporting a drop of 0.5%. Such trends are expected to further undermine business confidence and hinder private investments.
For India, the repercussions of a slowing U.S. economy are significant. The expected global economic growth rate for 2025 stands at 3.3%, lower than historical norms. Given this context, for India to achieve a GDP growth target of 6.5% for the 2024-2025 fiscal year, it necessitates a robust 7.6% GDP growth in Q4, a feat increasingly challenging amidst declining exports due to tariffs and the ongoing trade war. A decrease in U.S. economic vitality will inevitably impede India’s economic aspirations.
In conclusion, a decelerating U.S. economy is poised to adversely impact global economic growth, with potential ramifications on trade dynamics. Trump’s tariff policies are likely to exacerbate the situation, particularly influencing export-oriented economies like India. For India to meet its growth projections, it must navigate these challenging circumstances effectively, focusing on bolstering exports in the face of a constricted global market.
Original Source: www.livemint.com
