The sweeping new “reciprocal tariffs” announced by US President Donald Trump on Wednesday risk tipping the American economy into recession and pulling the global economy down with it, warned Mark Zandi, Chief Economist at Moody’s.In an interview with CNBC-TV18 following the announcement, which includes levies ranging from 20% to 40% on countries like China, the EU, Japan, and a 27% tariff on India, Zandi said, “If the reciprocal tariffs are implemented in full, I would expect some retaliation from countries abroad. The combination of those two things will result in an economic recession,” he stated, adding, “I think the US economy is going to go into recession and take the entire global economy with it.”
The tariffs, presented by the Trump administration as discounted rates aimed at balancing trade disparities, are expected to directly hit American consumers and businesses. Zandi described the tariffs as “a tax on American consumers,” predicting the bulk of the cost increases would fall on them. Mark Linscott, Senior Advisor at the US-India Strategic Partnership Forum (USISPF), agreed, noting, “There’s no doubt that tariffs do impact domestic consumption. They can raise the price of inputs for domestic manufacturers.”
Suneeta Reddy, MD of Apollo Hospitals, also highlighted that while aimed at the US trade deficit, the tariffs “will put price pressure on the US consumer.”Despite the potential economic fallout, experts see negotiation as a viable path forward. Linscott highlighted ongoing discussions, particularly between the US and India. “I think that individual countries will be having discussions with the administration. We know that, in fact, there have been quite active talks already between the United States and India,” he said, mentioning a recent USTR delegation visit to Delhi that made “tremendous progress.” Reddy echoed this sentiment, believing there is a “window of opportunity for countries to negotiate better terms.”India, facing a significant 27% tariff, is pursuing a strategic course, according to Reddy. While looking to manage its $46 billion trade surplus with the US, India is focusing on securing important deals, such as favourable prices for LNG and petroleum, purchasing US military hardware, and exploring joint defence manufacturing and investments in environmental technologies. Reddy expressed optimism, stating, “In the long run, India will benefit is my feeling.”However, Linscott explained why India didn’t receive an immediate reprieve from the tariffs despite positive talks. He suggested US expectations were perhaps unrealistically high, anticipating India would rapidly drop tariffs across the board to match low US rates. He noted there wasn’t enough on the table yet to secure a pause but held out hope for a near-term interim agreement.Compounding the situation is the general uncertainty surrounding the tariffs and the lack of a clear exit strategy from the White House. Zandi pointed out that since the tariffs are imposed by executive order and “can be changed with a stroke of a pen,” businesses are unlikely to make major investment decisions, such as relocating manufacturing to the US. Linscott added that President Trump “has been quite clear that some level of tariffs will be permanent,” reinforcing the view that while negotiations might soften the blow, the underlying policy uncertainty remains a significant challenge for global trade.Watch the accompanying video for the full discussion.
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