Trump’s US trade policy poses ‘significant downside risk’ for Asian nations, says Moody’s Ratings

Global Ratings agency Moody's ratings flagged that US President Donald Trump's US trade policy with China is expected to have a significant downside risk to the neighbouring Asian nations, including India, reported the news agency PTI.

“An escalation of US-Sino tensions and the spillover effects from a slowdown in China pose significant downside risks to the (Asian) region's growth prospects,” Nicky Dang, Senior Vice President of Credit Strategy & Guidance at Moody's, told the news agency. 

Dang also highlighted that nations with large domestic markets, like India, are likely to gain from the tariff war between the US and China as companies looking to access the Asian markets will tap into their economy. Still, any major shift will take a longer time.

“Economies with large domestic markets, such as India, may benefit from companies seeking access to these markets, but any major shift in investment flows would occur over several years,” said Dang, cited the agency report.

The report also cited that Indian exporters and traders are looking at the current US reciprocal tariff pause as a crucial opportunity to advance discussions on the proposed bilateral trade agreement between India and the US. 

The government aims to conclude the first phase by September to October of 2025. “The 90-day moratorium provides some space for all governments to negotiate for more favourable terms... Higher overall tariffs still place some inflationary pressure on the US economy,” said Dang.

US-China tariffs turmoil

Last week, Trump postponed his reciprocal tariffs by 90 days, except for the tariffs on China. The US government has imposed 125 per cent tariffs on all goods imported from China after the Asian nation retaliated against the reciprocal tariffs since its first move on April 4, 2025.

The US has kept an additional 10 per cent tariff on all imports into the nation while pausing the reciprocal duty rates for other world nations apart from China. 

China's first retaliation move was on Friday, April 4, when the Asian nation hit back with 34 per cent additional tariffs on all goods imported from the United States. This move erupted the ongoing tensions in the stock markets, prompting them to crash the next trading session.

The ratings agency expects that the ‘uncertainty’ which is looming over the negative impact of the additional tariffs is likely to continue and undermine business confidence and consumer sentiment in the Asian region.

“The uncertainty surrounding US trade policies will likely continue to undermine business confidence and consumer sentiment in the region, potentially lowering domestic demand and growth prospects. Furthermore, the additional tariffs on Chinese exports, which were not included in the pause, exert further pressure on China's growth,” said Dang.