Donald Trump’s plan to impose a 25% tariff on all automotive imports from April 3rd could have significant consequences for parts of Asia, particularly Korea and Japan, where auto exports account for 0.9% and 0.5% of GDP, respectively. The decision on automotive tariffs comes ahead of the reciprocal tariff announcement due on 2nd April. Much remains unclear about how these tariffs will be calculated. In addition to China, other vulnerable countries in Asia are Vietnam, Korea, Taiwan and India.
Meanwhile, the Indonesian rupiah earlier this week hit its weakest level against the US dollar since the Asian financial crisis amid mounting concerns over the direction of economic policy. Given the uncertainty, we have scaled back our expectations for interest rate cuts this year. That said, we are still forecasting 75bps of easing for the remainder of 2025, which is more dovish than the market consensus.
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