The US’ push for reciprocal tariffs is set to have a negative impact across Asia-Pacific (APAC), with developing economies such as India, Vietnam, and Thailand facing the biggest risks due to their wider tariff differentials with the US, according to a Moody’s Investors Service report. The extent of the impact will depend on whether the US raises its tariff rates or compels trading partners to lower their own import duties.
Electronics, Automotive, and Textiles Sectors Most at Risk
The electronics, motor vehicles, food, and textiles industries are among the most exposed sectors in APAC, particularly in economies that rely on export-driven growth models. Many ASEAN nations, deeply embedded in the global electronics supply chain, could face reduced export demand, forcing governments to recalibrate trade policies.
While the US remains a net exporter of food, feeds, and industrial supplies to APAC, it is a net importer of capital goods, automotive vehicles, and consumer goods from the region. Any reciprocal tariff measures could disrupt supply chains, affecting key sectors such as computer and electronic products, chemicals, motor vehicles, textiles, and wood products.
India’s Exposure Is Lower, but Food and Pharma Sectors Face Risks
Compared to other APAC economies, India has lower overall exposure to the potential US tariff adjustments. However, sectors like food, textiles, and pharmaceuticals could come under pressure.
Most India-based companies covered by Moody’s are domestically focused and have limited direct exposure to the US market, insulating them from major shocks. To mitigate the risks, India and the US are reportedly in talks to lower import tariffs on select US goods, expand market access for American farm products, and increase US energy purchases. A potential bilateral trade deal is being considered for fall 2025.
Regional Currency Pressures and Policy Response
Moody’s notes that the policy response of APAC governments will play a crucial role in determining the overall credit impact of reciprocal tariffs. Instead of escalating tensions, most governments are expected to negotiate bilaterally with the US, following recent diplomatic trends.
A more restrictive trade environment could also exert downward pressure on APAC currencies, leading to higher capital outflows and a stronger US dollar. However, regional central banks are likely to limit domestic monetary easing to maintain macroeconomic stability.
Despite external pressures, most APAC economies have sufficient macroprudential buffers and robust monetary frameworks, allowing them to withstand trade disruptions. Additionally, strong domestic demand and a slight easing of global financial conditions will provide further support to regional economies.
Shifting Trade Alliances in APAC
With rising uncertainty in global trade policies, APAC governments may seek greater regional cooperation to reduce dependence on US markets. The growing need for alternative trade alliances could accelerate economic integration within Asia, positioning the region to navigate the challenges of an increasingly interventionist US trade policy.