US tariffs to significantly hit Asia, says ADB, urging regional cooperation

By Anup Roy

 

The Asian Development Bank will lower its growth forecast for Asia further after the region was hit the hardest by tariffs from the US. 

The multilateral institution said the US tariffs will shave growth in the region by a third of a percentage point in 2025 and a full percentage point in 2026. 

 

In its annual outlook report released Wednesday, numbers for which were calculated before the April 2 tariff announcements by President Donald Trump, ADB forecast growth in emerging Asia to moderate to 4.9% in 2025 and 4.7% in 2026. This will get further revised down in its report in July, ADB’s Chief Economist Albert Park said in a virtual press conference Tuesday. 

 

Asia has been hit the hardest by the tariffs because of the concentration of countries that run a trade surplus with the US. “Full implementation of US tariff will hurt growth substantially in the entire region,” said Park. “Large uncertainties remain,” but some of the tariffs may be rolled back. 

 

While the tariffs will impact China the most, Asia’s largest economy has progressively lessened its dependence on US demand. However, other countries in the region have filled in that space and will be impacted severely, the ADB warned. About 3% of regional GDP depends on final demand from the US, Park said.

 

Even as China has retaliated against the US tariffs, the ADB does not expect other countries to undertake such measures as that will exacerbate the negative impact. Countries trying to competitively devalue their currencies will likely be hit by additional tariffs by the US, warned Principal Economist John Beirne.

 

The multilateral institution suggested countries in the region cooperate and engage in more trade between themselves, a trend that is already underway in Asia. They should also reach out to the US, Park said. 

 

Governments will also need to support their firms and workers from displacement to tide over the difficult period, the ADB officials said. However, if the high tariffs become permanent, such efforts will be unsustainable, they said.

 

The ADB officials also warned India of celebrating a relatively lower tariff as an opportunity as there is no certainty the tariffs would be here to stay. “You have to be cautious in celebrating 26% tariffs,” said Park. India’s tariff is lower than China’s 54% and regional manufacturing rival Vietnam’s 46% duty. 

 

Investors tend to scale back their investments in times of uncertainty and any decision also depends on other issues such as better infrastructure, energy, logistics, and access to supply chains, said Abdul Abiad, director, macroeconomics research at ADB.