US-APAC trade deals lift Asia’s export outlook

November 3, 2025 (MLN): A recent series of bilateral trade agreements between the United States and multiple Asia-Pacific (APAC) countries has reduced uncertainty for exporters in the region, potentially providing a modest lift to GDP growth over the next few years.

However, key details remain to be clarified, and tariff rates are still subject to change, as reported by fitch ratings.

Between October 20 and 30, the US finalized trade deals with China, Japan, South Korea, Vietnam, Malaysia, Thailand, Australia, and Cambodia.

Among these, the halving of the 20% US tariff on fentanyl-related imports from China stands out, effectively reducing China’s tariff burden by approximately 10% points.

The two countries have also agreed to a one-year pause on recent trade restrictions, including China’s curbs on rare earth exports, the US extension of export licensing requirements, and previously increased bilateral tariffs.

Economists expect these developments to have a small positive impact on economic growth in both China and the US during 2026-2027. Other Asian nations, particularly South Korea and Vietnam, could benefit indirectly from stronger demand in the US and China, although the direct boost to their economies is expected to be limited.

Greater clarity on tariffs is anticipated to bolster exporters’ confidence in planning medium- and long-term adjustments to supply chains, which could support investment growth in export-driven markets such as Malaysia, Thailand, and Vietnam.

The trade agreements also signal US support for rare earth mining expansion outside China, potentially spurring investment in Southeast Asia and Australia, though the macroeconomic impact is unlikely to be significant in the short term.

Despite these positive developments, analysts caution that higher US tariffs overall may dampen import demand and slow Asia’s export growth in 2026.

Recent trade deals have narrowed tariff differentials among major Asian exporters, reducing prospects for supply-chain shifts. India, which has yet to secure a US trade deal, faces a 50% tariff significantly higher than most other Asian exporters. US tariffs on China also remain above those applied to most other countries, even after the latest agreements.

South Korea secured a reduction of US tariffs on car and auto parts imports to 15% from 25%, aligning them with similar Japanese and EU products.

It also appears to have gained assurances that semiconductor tariffs will not disadvantage Korea relative to Taiwan.

Nonetheless, Korean and Japanese automakers continue to face tariff-related challenges, and South Korea’s export growth is expected to slow in 2026 amid higher US tariffs and weaker Chinese demand.

Investments pledged by Japan and South Korea in the US could influence sovereign credit profiles if implemented, particularly if they lead to sharp reductions in foreign-exchange reserves.

Unclear provisions on transshipments in the recent trade deals also pose potential sources of friction with the US.Meanwhile, several APAC governments, including Indonesia, South Korea, the Philippines, and Thailand, have adopted looser fiscal policies to offset potential growth risks from US trade actions in 2025.

While supportive of short-term growth, these policies could impede fiscal consolidation and affect public debt trajectories, a critical factor for sovereign credit ratings in the region.

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