Asian economies may not resort to retaliation to the tariffs announced by U.S. President Donald Trump and may opt for negotiation, according to Barclays. 

Barring China and possibly Indonesia, most Asian economies are expected to resort to negotiation rather than retaliation. The effect of tariffs is expected to reduce GDP forecasts for Asian economies. “The new tariffs imply significant downside risks to our GDP growth forecasts if they are not eventually reduced, and we believe they are likely to be more net deflationary than inflationary,”  according to a Barclays research note. “Most emerging Asia governments will likely face increased pressure now to negotiate with the Trump administration,” Barclays analysts wrote in the note. 

India may have entered an advanced stage in terms of negotiation, the report read. “Even before the 2 April announcement, governments, including India and Thailand have been openly discussing what additional goods could be purchased from the U.S. to mitigate the tariff risk,” the analysts said.

The mild reduction of GDP forecast is expected to keep the atmosphere for the RBI to cut rates fertile.  “We continue to expect the MPC to reduce the repo rate by 25 bps next week, based on the expectation of a moderation in the CPI inflation to 4.2% on average in FY2026. A final rate cut of 25 bps may be forthcoming in the June or August policy review, based on the evolving growth inflation dynamics,” according to Aditi Nayar , chief economist at ICRA, a credit rating agency. Barclays, too, forecast three more cuts for the rate to settle at 5.5%.