The escalation of the tariff war, with intermittent de-escalation, continues.

A 90-day pause in the reciprocal tariffs proposed by the Donald Trump administration in the United States (US) on all countries, excluding China, is in effect right now. These developments have made the global environment extremely uncertain and raised downside risks to growth. The World Trade Organization estimated the US-China tariff dispute alone could cut trade between the two countries by 80% and reduce global growth by 7% in the long run.

This month’s theme assesses the vulnerability of India’s trade in the current environment. India’s goods exports have been flat over the past few years, falling as a percentage of the gross domestic product (GDP). Merchandise exports stood at $437.07 billion in fiscal 2025 against $437.42 billion in the preceding fiscal. However, service exports, nearly half of the total exports, performed better, growing at 13.1% in April-February of fiscal 2025. Services exports are not highly correlated with the global trade cycle and, hence, provide some buffer to overall exports.

The near-term impact of the tariff reset on India’s trade will depend on the levels at which the tariffs settle and the trade deals India finalises. While the 90-day pause offers India an opportunity to fast-track its trade deal with the US, it has lost some of the advantage it held over Asian peers that were subjected to higher reciprocal tariffs.