S&P Global Ratings has forecasted a significant impact on economic growth for the Asia Pacific (APAC) region, warning that the increase in United States tariffs will have global repercussions. The increased tariffs on automobiles, pharmaceuticals, and semiconductor industries will likely make further strain in trade relations and uncertainty for countries that are heavily dependent on trade from the United States.
A Regional Slowdown: Tariffs’ Economic Toll
Appearing on the S&P Updates Economic Forecasts for APAC Economies webinar, S&P Global Ratings’ chief economist for the APAC region, Louis Kuijs, has shared his concerns regarding the impact of the newly revised forecasts. Regionally, the growth will be affected by the flags on the region’s exports, investments, economic growth, and overall industrial productivity.
Vulnerable Economies: Heavy Reliance on US Trade
Those countries that formed strong chains of production and trade networks with the US will be affected the most—as highlighted by Kuijs. The economies that have a huge share of their exported products reliant on the USA’s market are vulnerable to the increasing composite of tariffs and will suffer greatly because of the expenditure increases.
The Silver Lining: Not All Countries Are Equally Affected
Even so, the picture is not wholly pessimistic. As Kuijs pointed out, some APAC economies seem to be relatively shielded from the tariffs’ immediate effects. The Philippines, Singapore, Australia, and New Zealand are expected to sustain minimal direct impacts as they do not incur high tariffs or have a significant trade surplus with the United States.
The Indirect Impact: Chinese Export Diversion
The trade conflict will reverberate to other nations even if they are not the primary subjects of US tariffs. Kuijs warned that “when facing more challenges in the US market, Chinese exporters will refocus on selling to the rest of the region.” This change in policy from China is expected to increase the cutthroat competition in the region. This will, in turn, impact some Southeast Asian nations.
Growth Forecasts: A revision downward
S&P Global Ratings has only slightly altered its forecast for the APAC economies’ growth due to the region facing its own hurdles in the form of increasing tariffs and trade tensions. The agency now expects growth to fall to 4.1% in 2025, shifted from the 4.4% growth projection in 2024. This relatively modest revision stems from the overall strong performance of regional domestic demand, which seems likely to lessen the external trade headwinds.
Domestic demand: the saving grace for the region
An explanation accompanying the report showed that the negative repercussions of the U.S. tariffs would fall heavily on the export-focused economies, amplifying the struggle for APAC’s domestic demand-oriented region. As Kuijs noted, “I believe the most important conclusion is that even though U.S. tariff policy is punishing Apac economies heavily, strong domestic demand should avert a substantial growth decline.”
Conclusion: trade winds to maintain growth
Relatively better positioned to weather the storm, the region is expected to suffer from the imposition of U.S. tariffs on trade. Economies that depend heavily on exports will be impacted the most. How well APAC economies will be able to sustain growth relies primarily on the strength of domestic demand and their ability to respond to changes in global trade dynamics.
