Bank of America (BofA) has revised its growth forecasts for Asia, indicating a slowdown due to ongoing trade tensions between the U.S. and China, as well as additional tariff pressures. The bank now predicts that Asia’s GDP-weighted growth will decrease to 3.9% by 2025, a reduction of 60 basis points from earlier estimates. They anticipate a slight recovery to 4.2% in 2026. In China, GDP growth is expected to fall to 4.0% this year, down from a prior estimate of 4.5%.
BofA analysts also highlighted that while Japan is likely to narrowly avert a recession, it faces persistent challenges due to a 25% tariff imposed by the U.S. on automobiles. Meanwhile, India’s growth forecast is projected at 6.4%, reflecting a minor downgrade of 20 basis points, bolstered by supportive domestic policies. The bank noted that recent developments, such as a temporary 90-day pause on reciprocal tariffs and exemptions for electronics, provided short-term relief. However, the uncertainty surrounding U.S.-China relations remains unprecedented in its intensity.
With China imposing retaliatory tariffs of 125% on U.S. goods and witnessing a significant decline in U.S.-bound exports—between 30% to 50%—the region’s growth is under pressure. While tech exporters like Taiwan and Vietnam benefit from tariff exemptions, non-tech sectors are grappling with increasing difficulties. Southeast Asian countries, particularly Malaysia and Thailand, are particularly susceptible to weakening global demand and supply chain disruptions as outlined by BofA. The analysts further cautioned that risks to growth remain tilted downwards, especially if the U.S. slides into recession or if trade negotiations falter.
In response to these challenges, BofA expects regional central banks, including the People’s Bank of China (PBOC), to implement further policy easing, suggesting that monetary measures may precede any fiscal responses.