The Asian Development Bank (ADB) has indicated that the full implementation of U.S. tariffs may reduce growth in developing Asia by approximately one-third of a percentage point this year and nearly a full percentage point by 2026. In its recently released Asian Development Outlook report, the ADB forecasted a slight decrease in growth, projecting that it will ease to 4.9% in 2025—marking the slowest rate since 2022—and then drop further to 4.7% in 2026, down from 5.0% in 2024.
These forecasts were compiled prior to the United States introducing new import tariffs last week. Albert Park, the ADB’s chief economist, emphasized the uncertainty regarding the tariffs’ full implementation and their potential implications for growth.
He noted that if the tariffs are fully enacted, it could lead to lower growth figures than currently estimated. The ADB defines developing Asia as comprising 46 Asia-Pacific nations stretching from Georgia to Samoa, excluding Japan, Australia, and New Zealand.
The future effects of U.S. tariffs remain uncertain, as changes in negotiations, timing, or possible exemptions may alter their impact. Park warned that intensified retaliatory measures could lead to larger negative consequences.
Additionally, policy changes in the U.S. could affect global investments and trade, further complicating the region’s economic outlook. China’s anticipated slowdown also significantly influences these projections, with growth expected to decline from 5.0% in 2024 to 4.7% this year and 4.3% in 2026.
Southeast Asia, which initially benefited during the U.S.-China trade war, is forecasted to slow down as well, with growth slated to be 4.7% this year and next, a slight decrease from 4.8% in 2024. However, South Asia presents a more positive outlook, with strong domestic demand likely to push growth up to 6.0% in 2025 and 6.2% in 2026, compared to 5.8% last year.
Continued global demand for semiconductors should support growth in developing Asia, while regional inflation is expected to soften to 2.3% in 2025 and 2.2% in 2026, driven by falling prices for global oil and other commodities. This reduction in inflation could facilitate ongoing monetary easing from central banks, although it may occur at a slower pace due to the anticipated stance of the U.S. Federal Reserve regarding interest rates.