Global markets soared as trade fears faded: the S&P 500 surged 5%, and India’s Sensex outperformed others. President Trump’s tariff retreat eased pressure on the dollar, but the IMF cut its 2025 global‐growth forecast to 2.8%, warning of U.S.–China trade fallout. The Mar-a-Lago Accord’s bold plan to weaken the dollar sparks hope for U.S. industry, yet risks triggering a confidence crisis. Meanwhile, India’s resilience shines: it’s on track to outpace Japan and Germany and become the world’s third-largest economy. Can markets navigate the storm, or will trade tensions unravel the rally? Dive into our weekly commentary for answers.
The Art of the Fold: When the Trade War Dealing's Done
IMF Cuts Global Growth Outlook as Trade Tensions Rise
The IMF has cut its 2025 global GDP growth forecast to 2.8%, down from 3.3% in January and 3.2% in October 2024. The downgrade reflects rising trade tensions, mainly between the US and China. Higher tariffs are hurting business sentiment, delaying investments, and disrupting supply chains. Without tariff relief, downside risks could grow, leading to calls for coordinated action to support global demand and avoid a broader slowdown.
IMF Revises Inflation Forecasts: US Up, China Down
The IMF kept its 2025 global inflation forecast at 3.5%, but regional trends are diverging. Inflation in advanced economies is now seen at 2.4%, up 0.3 points, led by a US jump to 3.0% from 1.9%, as tariffs feed into consumer prices. Meanwhile, emerging market inflation was cut to 4.4%, with China’s forecast slashed by 1.7 points to 0.0%, signaling deflation risks. The gap makes monetary policy tougher—tightening pressure is building in the US and Europe, while some emerging markets may need to ease.
India on Track to Become World’s Third-Largest Economy by 2028
India’s limited trade exposure to the US and China positions it well amid global tensions. The IMF expects India to overtake Japan as the world’s fourth-largest economy in 2025 and surpass Germany by 2028. Strong growth, reforms, and foreign investment are fueling momentum. India's economic expectations index (6.33% in April vs. 1.75% for the US) and solid stock market gains show its relative resilience, making it a rare bright spot in a slowing global economy.
Will the Mar-a-Lago Accord Weaken the Dollar Long Term?
The Mar-a-Lago Accord, modeled after the 1985 Plaza Accord, aims to weaken the US dollar to boost exports and shrink the trade gap. Proposals include coordinated currency interventions and restructuring US debt by issuing ultra-long bonds. A weaker dollar could help manufacturing and cut deficits like it did in 1985, but it also risks hurting investor confidence and sparking legal challenges. The Dollar Index has already fallen below 99, its lowest since 2022. Keeping the dollar weak will require careful management to avoid capital flight and protect its reserve currency status.
Key Economic Reports to Watch This Week
April 30 will bring Q1 GDP data from the US and Eurozone, both expected at 1.0%. The US personal consumption report the same day will show if tariffs are pushing up consumer costs. Japan’s central bank is likely to hold steady amid trade uncertainty. Between April 29 and May 1, PMIs from the US, China, and Taiwan will gauge business sentiment under tariff pressures. Finally, US nonfarm payrolls on May 2 will offer an early look at labor market impacts from the trade war.
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