By Robert 
The ongoing global economic uncertainty, driven largely by escalating trade tensions between the US and China, is beginning to rattle even India’s top-tier IT services companies—TCS and Wipro. Long seen as relatively insulated from the volatility of goods trade, the services sector is now feeling the heat.
At a press conference on April 10, just a day after the US announced it would pause retaliatory tariffs for all nations except China, TCS CEO K. Krithivasan acknowledged the shifting climate:
“We had spoken about improving market sentiments and early signs of discretionary spending revival in January. This was not sustained due to many of the discussions around tariffs. We are observing delays in decision-making and project starts with respect to discretionary investments.”
Similarly, Wipro’s CEO Srinivas Pallia stated that decisions regarding employee salary hikes for FY26 will be taken “closer to the date,” citing rising global uncertainties. He warned that fresh tariffs targeting China could affect Wipro’s European clients, further clouding the outlook.
How the Trade War Is Hitting the Services Sector
According to global trade analysts and the WTO, the ripple effects of the trade war are now spilling over into services. The logic is simple: if tariffs choke global trade in goods, the demand for related services—such as logistics, travel, and investment support—shrinks too.
The WTO noted:
“The ongoing trade war is expected to slow the global services sector as tariff-induced declines in goods trade weaken demand for related services… while broader uncertainty dampens discretionary spending on travel and slows investment-related services.”
This marks a sharp contrast from the strong performance in 2024, when world merchandise trade grew by 2.9% and commercial services trade expanded by 6.8%. Despite this volume growth, the value of merchandise exports rose by just 2% to $24.43 trillion—pointing to falling export/import prices. Meanwhile, commercial services exports climbed 9% to $8.69 trillion, signaling robust demand across sectors.
Discretionary Spending Under Threat
Sectors like international travel are especially vulnerable, according to the WTO. Economic headwinds, rising prices, or even shifting visa policies could push consumers to cancel holidays or choose alternative destinations.
“Travel could be the first sector to be affected by economic uncertainty,” the WTO warned. “Although less prone to fluctuation, education- and health-related travel could still see a shift in demand.”
Digital and Financial Services Also at Risk
The report also highlights potential hurdles for digitally delivered services. Tighter intellectual property regulations arising from geopolitical tensions may stifle growth in online services like streaming, remote education, and gaming—cutting into export revenues for providers.
Financial services aren’t immune either. Economic uncertainty tends to reduce investment activity and lower the volume of credit card transactions, further affecting revenue streams.
Despite the headwinds, not all is bleak. Other commercial services are forecast to hold steady. The WTO projects a 5.3% growth in 2025—just under the baseline estimate of 6.1%. Digitally delivered services are still expected to post a 5.6% increase in 2025 and 4.7% in 2026, suggesting resilience despite turbulence.
The Rising Role of Services in Global Trade
Services are steadily taking up a larger share of global trade. In 2024, they accounted for 26.4% of the total—the highest since 2005. Exports of services rose 13% in Asia and 8% in both Europe and North America.
Advancements in digital technology and growing global demand have helped expand the footprint of services across borders. But as current trends show, not even the booming digital services space is entirely immune to geopolitical shocks.