2025 was a 'tariff-ied' year for global trade, with 2026 poised for a crucial transition, says an HSBC report. Higher tariffs will cause tectonic shifts, while India faces a weaker rupee and awaits a US trade deal amid strong fundamentals.
As the world approaches the end of 2025, the year is likely to be remembered as a "tariff-ied" one from a global trade and economic perspective, while 2026 may emerge as a crucial year of transition, according to a report by HSBC Asset Management. The report stated that 2025 marked a decisive shift toward higher tariffs and disrupted global supply chains, with countries adjusting to a new trade environment shaped by geopolitical developments. It noted that 2026 may be the first full year in which nations begin navigating the realities of a tariff-heavy global system.
Global Trade Faces 'Tectonic Shifts'
At present, the average effective tariff rate worldwide stands at 14 per cent. According to the report, global growth and world trade are likely to undergo tectonic shifts in this newly tariffed environment. It said 2026 could be the year when the implications of higher tariffs become visible across investment, economic growth, inflation, interest rates, and currencies.
The report added that the growing number of bilateral trade agreements between nations, along with each country's individual relationship with the United States, is expected to complicate the global trade and commerce landscape further.
India's Economic Outlook and Challenges
Turning to the domestic economy, the report pointed out that the second half of 2025 took on a darker tone following a negative tariff surprise for India. While the initial impact appeared to be a short-term blip, the report noted that the sustained adverse effects over the course of the year began to weigh on several macroeconomic indicators.
Rupee Weakness and External Pressures
These included weakness in the Indian rupee, pressures on trade and balance-of-payments data, and additional challenges for the Reserve Bank of India's liquidity management. The report highlighted that, from July 1, the Indian rupee weakened by approximately 4.2 per cent, making it one of the weakest performers among emerging-market peers.
Despite these concerns, the report said domestic macroeconomic fundamentals remain strong and suggest a "golden period" for the Indian economy. However, the report cautioned that market attention remains firmly fixed on the external front. It said uncertainty persists over the timing and outcome of a "good" trade deal with the US, with the wait becoming longer and more uncertain. As a result, external developments are likely to play a decisive role in shaping India's economic trajectory as the world transitions into 2026.
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