US tariff war with China is of significant strategic imperative, unlikely to wane off soon: Prabhudas Lilladher

New Delhi, April 13: Financial advisory firm Prabhudas Lilladher asserted that US tariff war with China is of significant strategic imperative and is unlikely to wane off soon, even if the US enters into bilateral trade agreements with various countries. According to the financial advisory firm, the current tariff stand-off will impact supply chains, global growth and money flow through first half of 2026 which could shave off 0.5 per cent from global GDP and result in increased volatility in commodities and currencies.

"Prolonged tariff wars, decline in global trade and lower spending by US corporates can hamper growth in IT services which can partly negate gains from cheaper crude oil prices. Higher quantum of dumping by China and other SE Asian nations can add to domestic woes," it said in a report.

US President Donald Trump paused the reciprocal tariffs for 90 days on dozens of countries that have engaged in negotiations with the US administration for a trade deal. However, the high reciprocal tariffs levied on China will continue.

Since assuming office for his second term, President Trump has reiterated his stance on tariff reciprocity, emphasising that the United States will match tariffs imposed by other countries, including India, to ensure fair trade.

About India, Prabhudas Lilladher said that domestic demand remains impacted as the benefit of the significant decline in food inflation is yet to be reflected in consumer sentiment and spending.

RBI has undertaken 50 basis points repo rate cuts (25 basis points each), and more cuts are likely to follow, Prabhudas Lilladher said.

RBI has also lowered GDP growth estimates for 2025-26 by 20 basis points.

"While normal monsoons cooled off inflation, govt capex and likely benefits of Rs 1000 billion tax cuts are positive, outlook looks extremely hazy on global cues," it asserted.

Nifty has shown a decline of 3.8 per cent by far in 2025 amidst slow domestic demand. FII selling and tariff wars have added to the chaos.

"We consider reciprocal tariffs as an attempt by the US to reignite the dead engine of its domestic manufacturing. However, not only has the US balance sheet weakened with huge trade deficit, a fiscal deficit of USD 1.2 trillion and a total debt of USD 36 trillion but it has become strategically vulnerable to China. Recent Chinese success in Deepseek AI, Digital Rambi and its global reach with BRI initiatives have shaken the US dominance," Prabhudas Lilladher opined.

Reader Comments

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Michael T.

This tariff war is really shaking up global markets. I work in manufacturing and we're already seeing supply chain disruptions. The 0.5% GDP hit seems conservative - feels worse on the ground. 😬

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Sarah L.

Interesting analysis but I wish they'd provided more data on how this specifically impacts different sectors. The IT services mention was particularly concerning - that's a huge employment sector!

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Rajiv K.

The China factor is being underestimated here. Their BRI initiatives are changing the game completely. US might be winning battles but losing the economic war long-term.

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Jennifer H.

While I understand the strategic importance, these tariffs are making everyday products so expensive! My small business is struggling with material costs. There's got to be a better way. 😕

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Amit P.

Respectful criticism: The article focuses too much on US-China while barely touching on how India is impacted beyond a few lines. Our domestic situation deserves more analysis given the GDP revisions.

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Thomas R.

The US debt figures mentioned ($36T!) are staggering. How can any country sustain that? Maybe tariffs are just a distraction from bigger structural problems.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.