Turbulence ahead as Asia transitions from a resilient 2024 into a more volatile and fragmented 2025 macro landscape, driven by trade tensions, a maturing tech cycle, and mixed domestic conditions.
Key Themes for 2025
1. Trumponomics & Trade Disruptions
- Trump’s second term policies to impose:
- 60% tariffs on Chinese imports
- 10% across-the-board tariffs (starting Q2 2025)
- Impact: Asia’s export-led economies—especially China, Vietnam, Japan, Korea, Taiwan, India—face headwinds.
- Secondary effects:
- Reduced business investment due to uncertainty
- Tighter global financial conditions (higher U.S. terminal rates, stronger USD)
2. China’s Stimulus vs. Export Overcapacity
- Fiscal stimulus focused on:
- Local government transfers
- Low-income social support
- Property sector and “trade-in” programs
- Mixed regional spillovers:
- Domestic demand revival in China = neutral-to-positive
- Redirected exports due to Western tariffs = disinflationary and negative for Asian manufacturers
3. Semiconductor Cycle Peaking
- 2024: Strong AI-driven rebound (+18% YoY in global shipments)
- 2025: Slower growth expected at +9.3%
- Weakness in legacy tech and consumer electronics
- China pushing for semiconductor self-sufficiency
- Implication: Export growth in Asia likely slows across the board
4. Domestic Demand Divergence
- Outperformers:
- Malaysia: Infrastructure, supply chain shifts, data center boom
- Philippines: Election-year infrastructure spending
- Lagging economies:
- India: Drag from tight credit/monetary policy
- Thailand & Korea: Weak internal consumption outlook
Growth & Inflation Outlook
| Metric | 2024 (Est.) | 2025 (Forecast) |
|---|---|---|
| Asia ex-Japan GDP growth | 4.3% | 3.9% |
| Asia ex-Japan CPI Inflation | 2.2% | 2.0% |
- GDP Outlook:
- Sequential growth moderation from Q2 2025
- ASEAN economies relatively more resilient
- Below-consensus forecasts for China, India, Korea, Thailand
- Disinflation to Persist:
- Driven by weak global demand, subdued commodity prices
- Additional disinflationary pressure from redirected Chinese exports
- Labor market rebalancing helping ease services inflation
Monetary Policy Outlook: Divergence Ahead
Central bank responses in Asia will diverge in 2025 based on domestic resilience, FX pressures, and reserve strength.
| Country | Policy Outlook (2025) |
|---|---|
| India | Aggressive easing |
| Philippines | Aggressive easing |
| Korea | Aggressive easing |
| Australia | Aggressive easing |
| Indonesia | Moderate easing |
| China | Moderate easing |
| Thailand | Moderate easing |
| Malaysia | Rate hikes |
| Japan | Rate hikes (BoJ normalization) |
- Rate Divergence: Decoupling from a hawkish Fed will depend on external balance sheets, reserve buffers, and exchange rate stability.
- Malaysia/Japan expected to hike due to inflation or policy normalization; others will lean into easing to support growth.
Risks to Watch
- Trade War Escalation: Retaliatory tariffs could intensify supply chain disruptions.
- China Spillovers: Overcapacity and weak confidence could spread deflationary pressures.
- Fed Volatility: If the Fed stays higher-for-longer, pressure on Asian FX could limit monetary flexibility.
- Semiconductor Overbuild: An overestimation of AI-related demand could trigger a sharper tech sector correction.
🧾 Conclusion: Navigating Choppier Waters
- The region’s goldilocks phase in 2024 is unlikely to persist.
- Growth slows, disinflation deepens, and policy fragmentation increases.
- Markets, corporates, and policymakers must adapt to:
- A more confrontational global trade environment
- China’s dual role as both stimulus source and exporter of deflation
- Uneven domestic demand recovery across Asia
