Trade Tensions Hit Business Confidence in Asia

Moody's Ratings highlights that uncertainties in US trade policies, exacerbated by tariffs, risk undermining business confidence and consumer sentiment in Asia, including India. The escalation of US-China tensions poses significant risks to growth prospects. Although the tariff pause mitigates some risks, uncertainties remain overshadowing future trade agreements.

Moody's Ratings has flagged concerns that the ongoing uncertainties surrounding US trade policy could undermine business confidence and consumer sentiment across Asian nations, including India. These apprehensions are a consequence of the recent tariff adjustments imposed by US President Donald Trump's administration, notably the 125% tariff on China.

Despite a three-month delay in the implementation of reciprocal tariffs, except for China, a universal 10% tariff on US-bound exports remains in place. Moody's Ratings Senior Vice President, Nicky Dang, noted that the potential escalation of US-Sino tensions and a slowdown in China present considerable risks to the region's growth.

While economies with substantial domestic markets, such as India, might see some benefits, significant shifts in investment flows will likely take years. Moody's Analytics has also revised India's growth forecast for 2025 downward. The tariff pause, although mitigating some impacts, does not eliminate trade policy uncertainties, which continue to pose challenges for future global trade dynamics.

(With inputs from agencies.)