Asia-Pacific growth projected for 2025, China faces challenges under new US administration: S&P Global

China faces economic setback as Asia-Pacific grows strongly in 2025

The Asia-Pacific region is expected to experience solid growth in the first quarter of 2025, according to a new report by S&P Global. However, China is predicted to face significant economic setbacks due to challenges posed by the incoming US administration, led by former President Donald Trump.

The report highlights that higher US tariffs on Chinese exports could diminish China’s competitiveness in the US market. This shift would likely benefit other Asian economies, which may attract more foreign direct investment, including from US firms seeking alternative supply chains.

A key factor driving growth in the region will be the gradual decline in interest rates and inflation, which is expected to improve consumer spending power. As a result, many Asia-Pacific economies are poised for stronger growth in 2025, with robust domestic demand supporting emerging markets, even as growth moderates in some countries.

While the region is expected to remain on a solid growth trajectory, central banks are likely to remain cautious. The S&P report cautioned that shifts in US macroeconomic policies and trade dynamics, particularly regarding tariffs and interest rate expectations, could disrupt regional growth. “US tariff increases, especially on China, and changes in US trade and macroeconomic policies are adding uncertainty to the global outlook,” the report said.

China, despite its stimulus measures, is forecast to see weaker growth due to the impact of US tariffs on its exports. The country’s GDP growth for 2025 is projected at 4.1%, significantly lower than India’s expected growth rate of 6.8%. While the region as a whole continues to show resilience, the uncertainty surrounding the US administration’s economic and trade policies presents risks for Asia-Pacific economies.

The report further noted that capital flows in the region will likely be influenced by US interest rates and trade policy shifts. As such, central banks in Asia-Pacific are expected to proceed cautiously, avoiding rapid cuts in policy rates.

In terms of US economic policy, the report forecasts fewer interest rate cuts than previously expected. The US Federal Reserve is anticipated to reduce rates by just three times in 2025, with the terminal rate reaching 3%-3.25% by late 2026. The first quarter of 2025 may see the policy rate at a more conservative 2.5%.

Overall, while much of Asia-Pacific is on track for solid growth in 2025, the economic outlook is shaped by significant uncertainties surrounding US policies, making cautious navigation essential for the region.

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