Trump tariffs mixed bag for Asia—excluding China: ADB chief economist

New Delhi: US President Donald Trump’s reciprocal tariffs are a mixed bag for Asian economies, other than China, given their opportunity to replace some of China’s exports to the US, according to Asian Development Bank (ADB) chief economist Albert Park.

Responding to a question from Mint on the sidelines of ADB’s 58th annual meeting, Park said that countries could stimulate growth by boosting domestic consumption through support to the vulnerable sections of society as well as through other ways of public spending.

ADB in its April 2025 Asian Development Outlook projected a 4.9% growth for the Asia-Pacific region in 2025, and 4.7% for next year. The multilateral agency expects India to grow at 6.7% in 2025-26 and at 6.8% in FY27. 

These projections reflected the world before the reciprocal tariffs announced by the US administration on 2 April, Park explained.

In the December Asian Development Outlook, ADB had projected some scenarios based on announcements of proposed tariffs during Trump’s election campaign. The plan then was to impose up to 65% tariffs on China and 10% on the rest of the world. 

In that analysis, ADB had expected China to be hurt somewhat modestly, but the tariffs finally announced are much higher. 

“So, the impact would probably be greater than estimated in that report,” Park said. “But for other countries in the region, the results are quite mixed because some countries may benefit from being able to replace the reduction in China's exports to the US. That had happened during the first Trump administration, when Vietnam benefited by an increase in their exports.” 

But companies supplying to China will be hurt if the country’s exports decline, he added.

“The other thing is the level of uncertainty that we are seeing today. There’s so much uncertainty. I think it’s really making it difficult for businesses to make plans to make new investments. We’re seeing a slight drop-off in manufacturing in many countries in the region partly because of this. They’re not really sure if they will be able to export and at what price (they will be able to do),” Park said.

‘Support the vulnerable’

ADB’s 2025 growth projection of 4.9% for the Asia-Pacific region is based on strong domestic demand throughout the region, which serves as a counterweight to the external demand shocks, Park said.

“If you cannot get growth by serving overseas demand, then domestic demand is another opportunity,” explained Park. “Now, how do you do that? I think that will depend on each economy.  The main macroeconomic levers include monetary and fiscal policies. But given the current financial volatility, central banks have to be looking pretty carefully at a lot of factors and it may not be so easy to just say, ‘Oh, let’s lower our interest rate’.”

Park proposed using fiscal policy measures to boost domestic demand.

“You could use fiscal policy to boost domestic demand. You could certainly be supporting workers who are vulnerable, who are hurt by the current environment, as a way both to protect vulnerable groups and also to preserve more demand in the economy,” Park said, adding that depending on the gravity of the problem, countries could be more aggressive in public spending.