Tariffs Will Depress Economic Growth, Says Top Economist

The United States President Donald Trump on Wednesday announced a slew of reciprocal tariffs on the world in his 'Liberation Day' speech from the Rose Garden, which has triggered several global uncertainties, which is likely to depress overall economic growth, according to top economist, Rishi Shah.

Why Will Tariffs Depress Economic Growth?

Rishi Shah, Partner and Economic Advisory Services Leader at Grand Thornton said that there are certain considerable uncertainties in the short term as global value chains recalibrate and trade flows readjust, creating ripple effects.

"This uncertainty is likely to depress overall economic growth as investment and expansion decisions are likely to get postponed," he added.

According to Shah, "the comprehensive tariffs announced by the US have ushered in a paradigm shift to the global economy. Viewing these developments from a general equilibrium perspective is crucial. These measures affect all countries and trading partners."

Additionally, he noted that it is now up to the private sector to demonstrate resilience and adaptability too navigate this transformed trade landscape.

Businesses must also identify new markets, restructure supply chains and develop innovative models, and those emerging successful would create new avenues of growth despite challenging macroeconomic conditions, he said.

Will Trump Tariffs Lead To America's Doom?

By imposing the highest tariffs in the industrialized world since the 1800s, the US President Donald Trump has made an attempt to fix trade deficits, which according to an MSNBC report is not something that tariffs can fix.

America runs trade deficits because of its strong economy backed by consumer spending and as low savings rate encourages international investors to spend those excess American dollars funding America's investment demands, the report said.

The decline in imports will be roughly matched by a decline in exports as the dollar becomes more expensive and therefore the tariffs will not notably shrink this trade deficit, according to the report.

Also Read: Donald Trump Tariffs: MSME Sector To Be The Hardest Hit, Says Expert