S&P says export-focussed Asia Pacific countries can manage US tariff moves but risks exist

Saturday, 22 March 2025 00:19 - - {{hitsCtrl.values.hits}}

S&P Global Ratings yesterday said export-focused Asia-Pacific will get pulled into tariff-induced trade volatility in 2025.

“Most rated firms in the region can manage much of the direct impact of higher US duties given their typically low reliance on that market. However, indirect stresses pose material risks to many sectors,” it said in a report titled “Asia-Pacific Corporates 2025: Who Can Take The Tariff Hit?”

“Rated Asia-Pacific firms with the most direct exposure to the US market include Japanese auto and machinery manufacturers, and Korean makers of autos, machinery and semiconductors. It’s the same for Indonesian producers of textiles, apparel, rubber, palm oil and tires,” said S&P Global Ratings’ Greater China Country Lead for Corporates Charles Chang.

“If the tariffs slow China’s growth further, there will be a knock-on to mining in Australia, minerals and intermediate metals in Indonesia, and steel and chemicals across Asia-Pacific,” said Chang.

“If a slowdown becomes regional, it could hit port and airport volumes and derail the consumer and real estate recovery in key Asia-Pacific markets, particularly Australia,” added Chang.

“For most Asia-Pacific entities, the bigger risk lies in China. Beijing’s recently announced stimulus cannot stop the country’s decelerating growth, we assume, with fresh US tariffs weighing on the economy.”

This will hit China’s industrial, power, transport, property, and consumer sectors.

Among Asia-Pacific exporters, Vietnam has the highest relative exposure to the US, with US exports amounting to 30% of the size of its economy. It is followed by Thailand (12.5%) and Malaysia (12.2%). At the lower end, Chinese, Indian, and Indonesian exports to the US total to just 2.5% or less of the countries’ GDP.

Among firms we rate in the region, 84% are investment grade. The category implies substantial resilience. However, downgrades have outnumbered upgrades in Asia-Pacific since the start of 2025.

“A ratings concentration at the lower end of investment grade, and a growing bias toward negative outlooks in some countries and sectors, suggest to us that this year may be more challenging for Asia-Pacific,” said Chang.

“We expect most firms to tread more carefully through the year,” he said.

“Governments across Asia-Pacific will be standing by to provide support. This raises the possibility of a range of outcomes, including some positive ones, particularly if direct and indirect effects of new US tariffs turn out to be less adverse than feared.”

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