Trade War Poses 'Greater Challenge' For Emerging Markets Than COVID: IMF's Gita Gopinath

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'Unlike during pandemic, when central banks in developing nations had room to swiftly cut interest rates, a trade war would present a more complex challenge,' IMF first MD says.
Gita Gopinath, which is first deputy managing director of the International Monetary Fund (IMF), has warned that the shock from the trade war could hit emerging markets harder than the COVID pandemic.
In an interview with The Financial Times, Gopinath said that unlike during the pandemic, when central banks in developing nations had room to swiftly cut interest rates and support their economies, a trade war scenario would present a more complex challenge.
'This time the challenge is going to be greater for them, compared to the pandemic," she said.
She pointed out that the imposition of tariffs and other trade barriers has a varied and often opaque impact on different economies, making it more difficult for policymakers to respond effectively. A prolonged escalation in global trade tensions, particularly between the US and China, could disrupt global supply chains and dampen investor confidence.
Gopinath also cautioned that capital outflows from emerging markets could accelerate if global risk sentiment worsens or if these countries are perceived as having weaker economic prospects. The slowdown in global trade volumes further adds to the uncertainty.
As the global economy grapples with rising geopolitical tensions and protectionist policies, Gopinath highlighted the growing pressure on emerging economies to remain resilient amid external shocks that are harder to predict and mitigate than a global health crisis.
'India Weighing Legal Uncertainties'
PTI report citing an official. The official said these developments could influence India's approach to the proposed bilateral trade pact with the US.
A team of US officials is visiting here from June 5 to hold talks with their Indian counterparts on the proposed pact.
Though India is looking for a balanced and a mutually beneficial trade agreement with the US, 'what we get as compared to other countries, will determine what we ultimately finalise in the deal", the official said.
The US is negotiating trade pacts with over 75 countries, including China. It has already finalised a pact with the UK.
Asked if some kind of interim trade deal can be agreed upon before July 9, the official, as per PTI, said a lot of uncertainties are there at present because of developments like the Trump administration's plan to further increase tariffs on steel and a stay on a court order against the US authorities' decisions on tariffs.
A US court of international trade on May 28 had ruled that present Trump tariffs were illegal under the international emergency economic powers act. The administration later filed an appeal and got a stay on this order.
On April 2, US President Donald Trump announced reciprocal tariffs against several countries, including India. It imposed an additional duty of 26 per cent on India, but later suspended it till July 9. However, the 10 per cent baseline duty on all the countries remains.
India has already reserved its right to impose retaliatory tariffs against US duties on steel and aluminium. It has also sought consultations under the WTO norms on US tariffs on auto components.
If India is considering taking similar measures in more products, the official said India will protect its interests.
First Published:
June 05, 2025, 15:32 IST