Impact of US Trade Policies on Asian Economies
Moody's Ratings indicates that uncertainties surrounding US trade policy, particularly under the administration of President Donald Trump, could negatively affect business confidence and consumer sentiment across Asian nations, including India. This uncertainty poses challenges to growth in these economies.
Key Concerns
- Tariffs and Trade Tensions:
- President Trump postponed reciprocal tariffs for three months, except for the 125% tariff on China.
- An additional 10% duty on exports to the US continues.
- US-Sino tensions and potential Chinese slowdown offer significant risks to Asian growth prospects.
- Growth Forecasts:
- Moody's Analytics revised India's 2025 growth forecast to 6.1% from 6.4%.
- The pause in tariffs may mitigate negative impacts but Asian economies still face risks due to high exposure to the US.
Trade Policy Implications
The pause in tariffs does not signify a reversal in de-globalization trends but increases uncertainty as the Trump administration aims to bring manufacturing back to the US. This shift hints at significant changes in the global trade system, historically trust and rule-based.
India-US Bilateral Trade Agreement
- There is a 90-day period to push talks on the bilateral trade agreement aiming to double trade to USD 500 billion by 2023 from the current USD 191 billion.
- The first phase of the agreement is targeted for completion by fall (September-October).
Overall, while the tariff pause provides a negotiation window, ongoing trade policy uncertainties continue to exert inflationary pressures and weaken sentiments, impacting growth and domestic demand.
