ADB Warns of Long-Term Economic Impact from Trump’s Policy Shifts on Asia-Pacific

In a worst-case scenario, aggressive policy shifts from the U.S. could shave off 0.5 percentage points of global GDP growth over the next four years. These changes could also reduce international trade and investment, leading to more expensive domestic production.

Should the U.S. impose widespread tariffs and restrict immigration, the resulting pressures on inflation could have global ramifications. A shrinking labor supply in the U.S. may compound the issue, further elevating inflationary pressures, particularly under a potentially more expansive fiscal policy proposed by a new Trump administration. Nevertheless, these negative effects are expected to have a limited impact on growth in developing Asia-Pacific countries, especially without additional policy support from the U.S.

In fact, China’s GDP growth is projected to slow by an average of 0.3 percentage points annually through 2028, even without any additional U.S. policy changes. The negative spillover effects in the region are expected to be mitigated by trade diversions and production shifts away from China to other countries, reducing the overall impact on the economy of Asia and the Pacific.

Looking closer at specific economies, China’s growth forecast remains unchanged at 4.8% in 2024, followed by 4.5% in 2025. India’s outlook has been revised downward, with expected growth of 6.5% in 2024, compared to an earlier forecast of 7%. This adjustment reflects weaker private investment and lower-than-expected demand in the housing sector. In Southeast Asia, however, growth projections for 2024 have been revised upward to 4.7%, driven by stronger manufacturing exports and increased government capital spending.