Asia-Pacific growth to fall if US imposes reciprocal tariffs: S&P

Major Asia Pacific economies like India, China, and Japan, will see growth fall by 0.2-0.4 percentage points (ppts) over the next two years if the US implements the reciprocal tariffs announced on April 2, S&P Global Ratings said on Tuesday.

It said that the threat and imposition of tariffs by the US will slow global trade and confidence. The region's dependency on exports with China and the US will have an outsized hit on manufacturers and small economies.

"Should the tariffs announced on April 2, 2025 resume for economies ex-China, the geopolitical and economic fallout will be deep," S&P Global Ratings, Asia-Pacific Head of Research, Eunice Tan said.

For India, S&P had in March projected a 6.5 per cent and 6.8 per cent growth for 2025 and 2026, respectively. If the reciprocal tariff as announced by US President Donald Trump is implemented, S&P estimates the growth to fall to 6.3 per cent and 6.5 per cent, respectively.

After the April 2 announcement jolted stock markets globally, Trump on April 9 postponed by three months the imposition of the reciprocal tariffs, with the exception of China on whom 125 per cent tariff has been slapped.

However, the 10 per cent additional duty on exports to US, which was announced on April 2, still continues.

If the tariffs announced on April 2 were fully implemented, S&P said, "the major (Asia Pacific) economies of mainland China, Japan, and India all see growth fall by 0.2-0.4 ppts over the next two year. Vietnam, Thailand, and Taiwan will take the largest direct hit to growth".

S&P said that credit conditions in Asia Pacific will remain firmly on the downside as the trade tussle between China and US marks a significant escalation in ties between the two countries, and is hitting growth and confidence in Asia-Pacific.

S&P said business confidence is set to deteriorate further amid halts in new investments and worsening household sentiment. Furthermore, equity and debt markets are likely to stay volatile.

The trade tussle between China and the US marks a significant escalation in ties between the two countries.

"The US administration has imposed 145 per cent additional tariffs on imports from China since January 20, a big jump from an effective tariff rate of about 15 per cent before President Trump returned to office.

"Such levels would slash the competitiveness of Chinese exports in the US, inflicting a heavy toll on China's economy," S&P said  In response to the latest US tariff hikes, China raised levies on US imports to 125 per cent and maintained export curbs on rare earth minerals. However, Chinese authorities signal they will no longer match further tariff increases by the Trump administration as American goods are no longer economically viable for Chinese importers at those tariff levels.

"A sharper deterioration in China-US relations will further strain confidence, and severely disrupt supply chains and global trade flows. Together, these events could spur a sharper global slowdown," S&P said.