WTO, IMF raise alarm over Trump’s reciprocal tariffs; Economists predict weaker Indian growth prospects

Meanwhile, the IMF warned that the new US tariffs have heightened the risk of sluggish global growth and urged the US to ease trade tensions.

“We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” IMF Managing Director Kristalina Georgieva said.

Okonjo-Iweala further emphasised that the recent US announcements will have substantial implications for global trade and economic growth prospects.

“I’m deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade. It is important to remember that, despite these new measures, the vast majority of global trade still flows under the WTO’s Most-Favoured-Nation (MFN) terms. Our estimates now indicate that this share currently stands at 74 per cent, down from around 80 per cent at the beginning of the year. WTO members must stand together to safeguard these gains,” she said, as per Reuters.

The WTO was established precisely for moments like this—as a platform for dialogue to prevent trade conflicts from escalating and to support an open and predictable trading environment, Okonjo-Iweala added, encouraging members to use WTO forums to engage constructively and seek cooperative solutions.

Risks to India’s growth

Goldman Sachs, in its report, estimated a 30-basis-point drag on India’s GDP growth for the current year, given India’s 4 per cent share in US final demand. The investment banking firm further stated that it expects no retaliation from India and believes some announced tariffs will likely be negotiated lower over time during the ongoing trade deal negotiations.

HDFC Bank Research warned that FY26 growth estimates could see a “significant downward revision” due to potential trade wars and the absence of a strong domestic demand recovery, exacerbated by weather-related disruptions, the risk of heatwaves, increased financial market volatility, inflation spikes, and a more severe downturn in the global economy.

Sakshi Gupta, Principal Economist at HDFC Bank, stated in a report that the across-the-board reciprocal tariffs imposed by the US are much more extreme than initially anticipated, posing a downside risk to India’s GDP growth forecast of around 30 basis points.

“We must admit that there continues to be a significant level of tentativeness in this forecast, which hinges on several ‘unknowns’—whether other countries like the EU and China would retaliate, or whether the US will eventually reduce tariffs through successful bilateral negotiations,” the report stated.

Furthermore, HDFC Bank’s research report warned that a sharp global growth slowdown, particularly in the US (with recession odds now rising to 40 per cent), could reduce India’s total export volumes—not just in goods but also in services.

“We believe this is the biggest risk to India’s GDP growth (estimated at 0.3-0.4 percentage points for a 0.8-1 per cent drop in global growth), more so from the direct impact of US tariffs. Moreover, with tariffs of over 50 per cent on China, the risk of oversupply flowing into India and hurting domestic manufacturing remains high,” the report noted.

Gupta added that the impact on India could be softened if it secures some concessions under the ongoing bilateral talks with the US. However, she cautioned that the potential benefits could be weaker than expected if other countries choose to absorb some of the tariff hikes by reducing prices, negotiate lower tariffs with the US, or engineer currency depreciation to offset the impact of tariffs.