World economy to slow sharply despite US-China tariff de-escalation, says Fitch Ratings.

World economy to slow sharply despite US-China tariff de-escalation, says Fitch Ratings.

Despite recent de-escalation in US-China trade tensions, Fitch Ratings has forecast a significant slowdown in the global economy. The financial services company predicts that the world GDP will grow at a slower pace in 2025, attributing this to the lingering effects of the trade war and ongoing geopolitical uncertainties.

The trade war, initiated by US President Donald Trump's sweeping tariffs, has had profound impacts on global trade dynamics. California Governor Gavin Newsom's lawsuit against Trump's tariffs, aimed at protecting consumers and businesses in the state, exemplifies the ongoing legal challenges [1]. Meanwhile, India's proposal to end taxes on U.S. ethane and LPG imports reflects a broader strategy to reduce trade surpluses and ease tariff burdens [2].

China has been proactive in its response to the trade war, advocating for a partnership with the European Union to counter what it perceives as U.S. "abusive" trade practices. Chinese Ambassador to Spain, Yao Jing, has emphasized China's commitment to open markets and multilateral trade [3]. This stance is echoed by Xi Jinping, who has called for support of the international system centered around the United Nations [4].

The trade war has also led to a widening of India's trade deficit with China, reaching a record $99.2 billion in the 2024/25 fiscal year. This is primarily due to increased imports of electronics and consumer durables [5]. The trade tensions have also prompted Singapore Prime Minister Lawrence Wong to express concerns about the global economic uncertainty [6].

Despite these challenges, there have been signs of cooperation and technological exchanges. Japan, for instance, has offered two Shinkansen train sets to India for the Mumbai-Ahmedabad high-speed rail project, reflecting a deepening of Indo-Japanese ties [7]. However, the ongoing negotiations and tariff discussions between Japan and the U.S. underscore the complexity of the situation [8].

Fitch Ratings' prediction highlights the need for global economic stakeholders to remain vigilant and prepared for potential disruptions. The de-escalation of US-China tariffs is a positive development, but the lingering effects of the trade war and the uncertainty surrounding future trade policies are likely to continue impacting the world economy.

References:
[1] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[2] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[3] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[4] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[5] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[6] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[7] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html
[8] https://www.moneycontrol.com/news/business/donald-trump-tariffs-live-updates-business-news-wipro-q4-earnings-us-china-trade-war-china-gdp-liveblog-12995520.html