Early signs indicate a slowdown in the US economy, driven by recent tariff policies from President Trump, with growth projected at 2.8% in 2024. Following initial growth recovery, a decline hit the fourth quarter as investments eased. The trade war enhances risks for global trade, particularly impacting India’s economic aspirations and requiring significant export growth to achieve GDP targets.
Recent indications suggest a deceleration in the US economy, expected to intensify with President Donald Trump’s forthcoming import tariffs. In 2024, the US GDP experienced a growth of 2.8%, a slight decrease from 2.9% in 2023. Initially sluggish, the economy rebounded in the second and third quarters with growth rates of 3% and 3.1%, attributed to increased consumer and government spending, alongside enhanced private investments and export performance. However, growth again waned in the fourth quarter, with a slowdown to 2.3%, driven by reduced private investment and a decline in exports.
President Trump enacted significant tariffs shortly after taking office, imposing a 25% duty on imports from Canada and Mexico, and a 10% tariff on imports from China. These tariffs were officially instituted on March 4, with additional tariffs on aluminum and steel imports set to take effect soon after. In response, affected nations including Canada, Mexico, and China retaliated with their own tariffs, marking the onset of a trade war.
In light of these developments, no new tax cuts were proposed to stimulate spending, despite the budget plan passed by the House of Representatives. President Trump indicated intentions to share potential savings from the Department of Government Efficiency (DOGE) with the public and allocate the remainder to debt reduction. However, skepticism surrounds DOGE’s capability to realize projected savings given the existing budget commitments.
The economic outlook appears bleak, with the Federal Reserve of Atlanta’s GDPNow growth tracker predicting a 1.5% contraction in the first quarter of 2025. Factors contributing to this forecast include decreased consumer spending, unstable private investment, and lower export levels, with consumer spending accounting for two-thirds of GDP. January’s consumer spending saw a decline of 0.5%, further exacerbating concerns over economic confidence.
For India, a slowing US economy portends potential ramifications for global economic growth, projected at only 3.3% in 2025. The ongoing trade tensions stemming from the tariffs are expected to exacerbate challenges in global trade dynamics. Consequently, India must achieve a remarkable 7.6% GDP growth during the fourth quarter to meet its own target of 6.5% for 2024-25, a feat that appears increasingly unattainable without robust export performance.
The anticipated slowdown in the US economy, linked to protective tariff measures and resultant trade wars, will likely have adverse consequences globally, particularly for countries like India. The expected deceleration in global economic growth will further strain India’s ability to meet ambitious GDP targets, heightening the urgency for strategic economic planning and export growth efforts. Looking ahead, the intricate relationship between US economic policies and global trade dynamics underlines the need for vigilance and adaptability among affected economies.
Original Source: www.livemint.com
