Impact of US Tariffs on Asian and Global Growth
The Asian Development Bank's chief economist, Albert Park, highlights the significant short-term risks posed by US tariffs on Asian and global growth. Recent forecasts have been downgraded:
- Asian Development Outlook revised growth for the region by 0.1 percentage point for this year to 4.8% and by 0.2 percentage point for the next year to 4.6%.
- India and leading export economies in Southeast Asia are particularly affected.
Global Supply Chains and Tariffs
The evolution of global supply chains in response to tariffs is in early stages. Key observations include:
- Chinese exports to the US are decreasing, but China is redirecting exports to other countries.
- Other Asian exports are increasing to compensate for reduced Chinese exports to the US.
- Most Asian export economies face similar tariff rates, with India and China facing higher rates.
- Some sectors, like mobile phones, remain unaffected due to specific trade agreements (e.g., Apple's exception in India).
Strategic Focus for India
India should focus on controllable factors and adapt to the changing trade environment:
- Consider further RBI interest rate cuts to stimulate the economy.
- GST relief expected to boost consumer demand and investment.
- Improve logistics, urban planning, and land acquisition to support private investment.
Retaliation and Competitiveness
Retaliating against tariffs is viewed as counterproductive:
- Retaliation with higher tariffs can harm one's own economy.
- Focus should be on diversifying trading partners and enhancing competitiveness.
- Reducing import tariffs is crucial for trade competitiveness.