US tariffs risk triggering 'recessionary phase' in major economies, fears Montek Singh Ahluwalia

When asked if India should retaliate to US tariffs, Ahluwalia noted that it won't 'make sense'. He explained that while US is India's largest trading partner, India is not the same for US. Hence, any counter-tariff by India won't significantly impact American economy.

US President Trump's reciprocal tariffs, which continue to rattled global markets as other nations rollout counter-measures, is also triggering fears of a US recession and may even prompt a recessionary phase in major economies, leading economist and former Planning Commission Deputy Chair Montek Singh Ahluwalia has said.

Ahluwalia told Business Standard newspaper that retaliatory tariffs run the risk of raising prices in major economies and could trigger an economic slowdown, even prompting a recessionary phase.

China's counter-measure to impose a 34 percent tariff on US imports has triggered fears of a major trade war, sending asset classes like equity, gold and metals alike sharply lower on April 7.

Montek Singh added that the tariffs could not only affect trade, but also investments. "The future of global value chains as a vehicle for achieving competitive efficiency is now in doubt," Ahluwalia said.

When asked if India should retaliate to US tariffs, Ahluwalia noted that it won't 'make sense'. He explained that while US is India's largest trading partner, India is not the same for US. Hence, any counter-tariff by India won't significantly impact American economy.

Trump has called India a 'tariff-abuser' in the past, imposing a 26 percent tariff on April 2, while is higher than many estimates, yet lower when compared to other Asian economies. Trump had said on April 2, "PM Modi...is a great friend of mine, but I said you're a friend of mine, but you're not treating us right. They charge us 52 percent."

Ahluwalia added that he has repeatedly said that India's tariffs are indeed high, and the country should reduce them for its own good. On being asked if India may benefit from the higher tariffs levied on Asian peers like Bangladesh, China and Vietnam, Ahluwalia said early gains may not count, as US tariffs and retaliatory measures will negatively impact the total import demand in US in the longer run.

The economist further added that it is important for India to improve its bilateral trade relations as much as possible, and conclude the FTA talks with EU and UK soon, amid changing global geopolitical landscape.