Context:
More than two months into Donald Trump’s presidency, both U.S. citizens and global stakeholders continue to grapple with the implications of his policies. Early economic projections from the U.S. Federal Reserve reflect growing uncertainty in key macroeconomic indicators.
Federal Reserve Projections
- Inflation: Expected to firm up.
- Economic Growth: Projected to slow down.
- Unemployment: Likely to increase in 2025.
- Monetary Policy: The Fed remains on track for rate cuts totaling 50 basis points in 2025, but the timeline could shift due to trade uncertainties.
- Jerome Powell’s Comments: The Fed Chairman highlighted high uncertainty, largely due to tariffs, which could delay achieving the 2% inflation target.
Trade and Tariff Uncertainty
- The biggest source of concern is the U.S.’s trade policy.
- Reciprocal tariffs set to be imposed on April 2 could significantly disrupt global trade.
- The complexity of implementing these tariffs could complicate both U.S. domestic and global trade policy.
- Tariffs may trigger price shocks, further affecting inflation expectations and business confidence.
Broader Policy Concerns
- Beyond trade, immigration policies are expected to have long-term consequences for the U.S. economy.
- The combination of tariffs and restrictive immigration policies adds to global and domestic uncertainty.
Implications for India
- Indian policymakers and investors need to prepare for continued short-term uncertainty.
- A U.S. trade delegation is visiting India this week to advance a proposed bilateral trade agreement, which will be closely monitored.
- Continuous diplomatic engagement with the U.S. will be critical for India.
The Trump administration’s policies, particularly on trade and immigration, are likely to continue disrupting global economic stability. While markets have adjusted to some extent, long-term clarity will only emerge once trade-related uncertainties are resolved. For India, proactive engagement and preparedness will be key in navigating this volatile g
