🐌 The Slowdown of America’s Economy

While we’re aware that the tariffs are broadly responsible for the reduced levels of growth, within this there are specific factors.

Due to the tariffs, the global supply chain has been disrupted. Orders for products, like China’s order for Boeing aircraft, have either been returned or put on hold.

A disruption in the supply chain may also result in a shortage of goods, pushing up the value of commodities. Take the case of America itself. Valued at $15 trillion, consumer spending accounts for around 70% of the country’s GDP. Now if goods get pricier, consumers will buy less, affecting the GDP.

The tariffs have also led to uncertainty, and hence, people are not investing as much. They are selling stocks, leading to market crashes.

📈 India’s growth affected

Earlier, the IMF had revised its India growth rate to 6.3%, bringing it down by 0.4%. This is marginally lower than the Reserve Bank of India’s 6.5%. But there is no cause for alarm. The IMF has assured that India’s growth outlook is comparatively more stable than other nations.

The reason for this is that private consumption is still robust, mostly in rural areas.

📉 Global downturn

Owing to the tariffs, the IMF has said that globally trade will be at 1.7% in 2025, whereas last year it was at 3.8%. In terms of global GDP, now it is estimated to grow 2.8% in 2025 and 3% in 2026. The prediction for both years was 3.3% in January.

Debt is also predicted to rise by 2.8% points making debt levels above 95% of GDP. To give you an idea, the European Union (EU) says the debt-to-GDP ratio should not exceed 60%. A higher debt-to-GDP ratio means it’s that much tougher for the country to pay back its debts. Debt is incurred when government borrowing rises and output reduces. This ratio measures how much a country owes vs the value of the goods and services it produces.

FYI: Debt-to-GDP is calculated by dividing a nation’s debt by its GDP and multiplying it by 100.

Looking at specific countries, China, the worst affected by the tariffs, their real GDP has gone down from 4.6% to 4%. Whereas in contrast, the EU is expected to grow by 0.8%.

Now that we know what the numbers are, let's see how this manifests in the governance of nations.

📃 Effect of the slowdown

Interest rates could increase, reducing the funds available to spend on public investments and social programs.

In addition to the tariffs, the current geopolitical situation might divert essential funds towards defence, thus increasing debts.

Advanced nations that could provide foreign aid to countries in need might have to scale back in the interest of their own states.

So, this is what the IMF suggests nations do.

🥊 Dealing with the downturn

Governments should offer temporary fiscal support to those industries affected by the tariffs the most.

Also, endeavours should be undertaken to reduce public debt and increase buffers. In the case of public spending on certain areas, measures should be undertaken to reduce spending in other aspects.

But mostly governments should find ways to reassure their citizens, build trust, implement just taxation policies and handle available resources with prudence.