Soft growth ahead, region to weather tariff threat

Asia’s economies look set for further weak growth over the rest of this year and to the end of 2026, as tighter fiscal policy and softer exports outweigh resilient consumption, which is being supported by looser monetary policy. The regional impact of Trump tariffs should be manageable, not least because most countries have been hit with a similar tariff rate so will not experience a loss of competitiveness vis-à-vis non-US producers. What’s more, some economies, notably Vietnam, will continue to benefit as supply chains shift away from China. Inflation is likely to stay low given the subdued outlook for economic growth. A benign inflation backdrop in turn leaves most central banks with scope to ease policy further, and we expect rate cuts of 50–125bp across much of the region over the coming year. Taiwan, which is likely to leave rates on hold, is the key outlier.