Trump's tariffs plan will hurt Asia, but it is not all doom and gloom

S-E Asia likely to outpace China in GDP, FDI growth over next decade

- Ovais Subhani

Strong manufacturing capabilities and cost advantages will keep Singapore and other Asean economies attractive investment destinations, but they still might take a hit from any policy upheaval in US President-elect Donald Trump's four-year term.

Trump's promise to impose a 60 per cent tariff on imports from China and as much as 20 per cent on those from the rest of the world opens the door for retaliatory tariffs, which will crimp global trade and raise the prices of tradable goods.

Ms Selena Ling, OCBC Bank's chief economist and head of global treasury research and strategy, said the surge in tariffs alone could wipe out anywhere between 0.4 percentage point and more than 1 percentage point from Singapore's 2025 gross domestic product (GDP) growth.

Even if Trump chooses not to impose all tariffs at once and phases them in over the next few years, the hit to growth will still be substantial.

Mr Chetan Ahya, US investment bank Morgan Stanley's Hong Kong-based chief Asia economist, said: "Our base case now assumes the US takes up tariff increases on China in a phased fashion, rising by 15 percentage points in 2025 and another 10 percentage points in 2026.

"While we remain of the view that this will bring a growth drag that is lesser than in 2018-19, it will nonetheless slow Asia's growth from 4.5 per cent in 2024 to 4.1 per cent in 2025."

Singapore's GDP growth projected by Morgan Stanley at 2.8 per cent in 2024 will decelerate to 1.5 per cent in 2025 and 1.4 per cent in 2026.

Ms Priyanka Kishore, founder and principal economist of macro consultancy Asia Decoded, said all of Asia is in the line of fire from a bilateral trade perspective.