Trump Tariffs to Define Global Trade in 2025

The liberal use of tariff threats by US President-elect Donald Trump before his inauguration next month raises questions over the forecasts of how world trade would shape up in the coming year, but Indian exporters are mostly positive about the prospects and their biggest worry stems from demand slowdown in bigger markets.

- Mukesh Jagota

The World Trade Organization (WTO) has forecast world merchandise trade to grow at 3% in 2025 after an expansion this year. Indian exports have been growing at the world average of 2.7%. In the January-November period, the merchandise exports stood at $400 billion, up 2% compared to the same period of last year.

The Federation of Indian Export Organisations (FIEO) expects a slow start to 2025 and an improvement in trade in the second half as the incoming Trump administration is expected to make efforts to end wars in Gaza and Russia-Ukraine. Trump's tariff challenge will remain and will have to be navigated deftly.

The drop in freight rates in recent weeks suggests that either the demand has slackened or enough inventory has been piled up so fresh buying will be slow to come on stream, said Ajay Sahai, chief executive officer and director general of FIEO.

Trump has said on many occasions that war in West Asia needed to end sooner than later. On December 22, Trump announced that Russian President Vladimir Putin has expressed his interest in meeting him regarding the war with Ukraine.

"The end of conflicts in the West Asia will improve the situation in the Red Sea region making navigation through the Suez Canal possible once again," he said. The container ships have been completely avoiding Red Sea routes since early 2014 and taking longer routes through the Cape of Good Hope. The longer routes have led to longer travel times and higher freight rates. The resolution of the Russia-Ukraine conflict could lead to increased demand from Europe.