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Investing.com-- Bank of America (BofA) has downgraded its 2025 growth forecasts for Asia, warning that U.S.-China trade tensions and broader tariff pressures will weigh heavily on the region’s economies.
The bank now expects Asia’s GDP-weighted growth to slow to 3.9% in 2025, down 60 basis points from its previous estimate, with a modest recovery to 4.2% in 2026.
China’s GDP growth is now projected to decelerate to 4.0% this year from previous estimates of 4.5%, while Japan may narrowly avoid a recession despite 25% U.S. tariffs on autos, BofA analysts said in a note.
India is insulated by domestic policy support and is forecast to grow 6.4%, a 20bp downgrade, they added.
BofA analysts noted that while a 90-day pause on reciprocal tariffs and exemptions for electronics provided temporary relief, uncertainty remains "at a historic level" due to escalating U.S.-China tensions.
China’s retaliatory tariffs of 125% on U.S. goods and a 30–50% drop in U.S.-bound exports from China are exacerbating the drag, analysts stated.
Tech exporters like Taiwan and Vietnam benefit from exemptions, but non-tech sectors face mounting challenges. Southeast Asia, particularly Malaysia and Thailand, is vulnerable to weaker global demand and supply chain disruptions, BofA said.
BofA analysts warned that risks remain skewed downward, especially if the U.S. enters a recession or trade talks stall.
They expect regional central banks, including the People’s Bank of China (PBOC), to ease policy further to cushion the blow, saying "monetary easing may precede fiscal measures."