From Bloomberg, April 3:
Asia is bearing the brunt of new US tariffs which will drag on regional growth through weaker business investment and sentiment, requiring central banks to step in with more interest-rate cuts, economists reckon.
“The impact on ASEAN is more pronounced this time,” said Selena Ling, head of research at Oversea-Chinese Banking Corp. “Given a narrower tariff gap between China and previous popular destinations such as Vietnam and Thailand, China’s prior strategy of routing exports through ASEAN may now be less effective. As a result, the trade dynamic may shift again.”
The Trump administration’s tariffs come at a time when Asian economies are already grappling with tepid growth, with sticky inflation keeping some central banks on high alert. While Australia and New Zealand are among countries that got off relatively lightly with a 10% levy, as small, open economies they are particularly reliant on global trade to underpin prosperity.
Money markets are now pricing four more rate cuts this year by Australia’s central bank, up from three previously, which would take its cash rate to 3.1%.
Economists at Goldman Sachs Group Inc. have cut growth forecasts for Asia and predict an easier monetary policy stance in India, South Korea and several Southeast Asian economies including Indonesia and Malaysia.
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There will be a “hard-hitting impact” on economic growth for the region, OCBC’s Ling said, singling out Vietnam as the country set to see the biggest impact, followed by Thailand. She anticipates Indonesia and India will be “more insulated” and the Philippines the least impacted. Ling also revised her central bank forecasts, adding 50-basis points of cuts each for the five countries....
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