He believes it is unlikely that the US will roll back trade tariffs to the levels seen before the current administration took office. In 2024, the effective tariff rate was around 2.3%. Today, it’s estimated to be between 25% and 30%, and such a major policy shift could weigh on both US and global growth.
Read Here | Jeffrey Sachs warns India against turning anti-China to win US favourCoulton noted that while recession risks have eased somewhat, the sharp rise in tariffs could still have a significant economic impact. With US import volumes unlikely to fall quickly, the government is expected to collect far more in tariff revenue—potentially hundreds of billions of dollars. That money could either be saved, which would slow growth, or spent, possibly through tax cuts.
India’s exposure to US tariffs is lower than many other Asian countries. While that might limit the damage, Coulton warned, “I don’t think there is any winners from this trade war.” At best, India may lose less compared to other Asian countries that got whacked with the reciprocal tariffs.
When asked about the risk of a currency war—particularly if China devalues the yuan to remain competitive—Coulton said it’s not his base case.
However, if China wanted to protect its export sector—especially given the pressure on the $500 billion worth of goods it exports to the US—it might consider devaluing its currency. A weaker currency would make Chinese goods cheaper and more attractive in global markets, but it could also likely trigger financial instability across emerging markets by driving capital outflows.
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(Edited by : Shweta Mungre)
