Trump-Fed Conflict Endangers Global Stability; India's US Deal Provides No Shield
Trump's conflict with the US Federal Reserve could trigger worldwide economic instability, bypassing protections from India's bilateral trade agreement.
Former US President Donald Trump’s renewed attacks on the US Federal Reserve and its independence are raising concerns about global economic stability, with potential spillover effects that could reach emerging markets such as India. As Trump signals a more interventionist approach toward monetary policy ahead of a possible return to the White House, economists warn that even strong bilateral trade ties may not be enough to insulate countries from the fallout.
Trump has repeatedly criticised the Fed for keeping interest rates high, arguing that tighter monetary policy hurts growth and competitiveness. Such rhetoric, analysts say, undermines confidence in the central bank’s autonomy, a cornerstone of global financial stability. Any perception that US monetary policy could be driven by political considerations risks unsettling markets, weakening the dollar’s credibility, and triggering volatility across currencies and capital flows worldwide.
For India, the implications are significant. The US remains a key trade partner and a major source of capital inflows, and New Delhi has worked to strengthen economic engagement through trade negotiations and strategic cooperation. However, experts caution that a potential India-US trade deal would offer limited protection against global shocks arising from US monetary turbulence. Financial markets, unlike trade agreements, react swiftly to uncertainty, often with little regard for bilateral arrangements.
Also Read: India-US Trade Agreement in Final Stages, Will Boost Exports and Jobs, Says Jaishankar
A destabilised US monetary environment could lead to abrupt shifts in global liquidity, impacting emerging economies through currency pressure, higher borrowing costs, and capital outflows. India, while better positioned than in past cycles due to stronger foreign exchange reserves and macroeconomic management, would still face challenges if global risk appetite deteriorates sharply.
Economists also point out that India’s growth story is increasingly intertwined with global demand and financial conditions. Any slowdown triggered by instability in the world’s largest economy could weigh on exports, investment sentiment, and corporate earnings, regardless of trade concessions or tariff advantages.
Ultimately, Trump’s confrontation with the Fed highlights a broader risk facing the global economy: the politicisation of institutions designed to operate independently. For India, the episode serves as a reminder that resilience depends less on individual trade deals and more on sound domestic fundamentals, policy credibility, and preparedness for external shocks in an increasingly interconnected world.
Also Read: Economist Jeffrey Sachs: Russian Oil Sanctions Are Unilateral US Measures
