No, the global economy isn't falling apart despite Trump's shocks | Current Affairs | Vision IAS

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No, the global economy isn't falling apart despite Trump's shocks

2 min read

Global Economic Impact of Trump's Tariffs

On April 2, President Donald Trump declared a "Liberation Day," implementing reciprocal tariffs on 180 countries and territories. A 90-day pause was announced on April 9 for all countries except China, and tariffs on Chinese imports were raised to 145%. China retaliated with a 125% tariff on U.S. imports.

Economic Projections and Reactions

  • IMF Projections:
    • Global growth is expected to slow from 3.3% to 2.8%.
    • U.S. growth projected to decrease from 2.8% in 2024 to 1.8% in 2025.
    • China's growth expected to slow from 5% to 4%.
    • India's growth forecasted at 6.2% compared to an earlier projection of 6.5%.
  • Comparison with Past Shocks:
    • Global Financial Crisis (2008): Growth fell from 2.7% to -0.4%.
    • Covid Crisis (2020): Growth declined from 2.9% to -2.7%.
    • The current tariff-induced slowdown of 0.5 percentage points is comparatively minor.

Analysis and Response

  • Scott Bessent's Perspective:
    • Attributed market reactions to common deleveraging convulsions in the fixed-income market.
    • Hedge funds were selling bonds and equities to meet margin calls.
    • He downplayed the risk of a financial crisis similar to past events due to better bank capital positions.
  • The Economist, although critical of Trump's policies, acknowledged that U.S. stocks did not signal a recession.

Conclusion

  • President Trump's economic strategies may cause short-term challenges but are not expected to lead to a severe economic collapse.
  • Despite criticism, there is a general consensus that drastic negative outcomes are unlikely, as supported by IMF forecasts and market recoveries.
  • Tags :
  • Trump's Tariffs
  • IMF Projections
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