Multilateral bodies World Trade Organization (WTO) and the International Monetary Fund (IMF) have warned that the US’s sweeping reciprocal tariffs will derail global growth and trade, even as analysts cut India’s near-term growth prospects.

The WTO, in its initial estimate, suggested that the latest tariffs, coupled with those introduced since the beginning of the year, could lead to an overall contraction of around 1% in global trade this year.

The shrinking trade volumes this year translates to “a downward revision of nearly four percentage points from previous projections,” the WTO said.

“I’m deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade,” WTO director-general Ngozi Okonjo-Iweala said in a statement.

Despite these new measures, the vast majority of global trade still flows under the WTO’s most-favored-nation (MFN) terms, the WTO said, adding that its “estimates now indicate that this share currently stands at 74%, down from around 80% at the beginning of the year. WTO members must stand together to safeguard these gains.”

Okonjo-Iweala said trade measures “of this magnitude have the potential to create significant trade diversion effects. I call on members to manage the resulting pressures responsibly to prevent trade tensions from proliferating.”

IMF warns of ‘significant risk’

The IMF, meanwhile, warned that the US tariffs “clearly represent a significant risk to the global outlook at a time of sluggish growth.”

“It is important to avoid steps that could further harm the world economy. We appeal to the US and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” IMF managing director Kristalina Georgieva said in a statement.

“We will share the results of our assessment in the World Economic Outlook, which will be published at the time of the IMF/World Bank Spring Meetings later this month,” the IMF statement said.

Trump on Wednesday rolled out “reciprocal” tariffs on its trading partners, including India, potentially the world into a trade war.

The US slapped India with a 27% tariff, one of the highest rates imposed on a trading partner, despite pointing to his good personal ties with Prime Minister Narendra Modi.

Analysts have warned that the new tariffs will drag down India’s gross domestic product (GDP) growth in the near term.

Tariffs may derail India growth

Goldman Sachs lowered its year-on-year growth forecast for India in calendar year 2025 and fiscal year 2026 (ending March) by 30 basis points (bps) and 20 bps, respectively, to 6.1%.

“There are risks of additional growth cuts depending on where tariff rates settle, which in part will depend on negotiations,” a note by the economic research wing of Goldman Sachs, titled ‘India: US “reciprocal” tariffs impact: Shaving growth; Adding 50bp further easing,’ said.

“We expect no retaliation from India, and believe some announced tariffs will likely be negotiated lower over time,” the note authored by Goldman Sachs economists Santanu Sengupta, Arjun Varma, and Andrew Tilton said.

The US and India are working on a trade deal with the aim of increasing bilateral trade.

India has already offered reductions in its own tariff rates charged to the US, and has increased energy purchases from the US in March.

In addition to the 30 bps drag on growth this year, courtesy the tariffs, Goldman Sachs sees a further 20 bps hit from a slowdown in services export, following its recent downgrade of US GDP growth for the January-to-March quarter based on muted economic activity.

With growth slowing and inflation falling within the Reserve Bank of India’s target range by the January-to-March quarter, Goldman Sachs sees an additional 50 bps monetary policy easing this year—a 25 bps cut each in the July-to-September and October-to-December quarters, totaling a 100 bps rate cuts in this cycle.

The RBI has also been willing to allow a two-way volatility in the rupee, “and we continue to expect the rupee to trade in line with regional currencies,” it added.