Fashion
S&P sees China growth slowing to 4% in H2 amid tariffs, weak demand
China’s economy is expected to slow sharply, with real GDP growth projected at about 4 per cent year-on-year (YoY) in the second half of 2025 and through 2026, down from 5.3 per cent in the first half of this year, according to S&P Global Ratings. The deceleration is driven by weakening exports, sluggish organic domestic demand, and only modest macroeconomic stimulus.
China’s overall exports held up through August despite a steep 33 per cent YoY fall in shipments to the US, due to robust growth to ASEAN markets. However, exports are expected to slow in the coming months due to higher US tariffs, slowing global demand, and rising Mexican import duties on economies without free trade agreements, which also cover China.
S&P Global Ratings sees China’s growth slowing to 4 per cent in the second half of 2025-2026 on weak exports, housing slump, and muted demand.
Asia-Pacific faces US tariff headwinds, with India hit hardest, but resilient consumption, AI-led investment, and policy easing will cushion the impact.
Inflation easing allows further regional rate cuts.
Uncertainty is amplified by the 90-day review mechanism under which China’s trade status with the US can be reset based on bilateral politics, leaving exporters vulnerable, S&P Global said in a release.
Domestic demand, which began the year strongly, is losing momentum as consumption and investment soften, dragged down by a persistent housing slump, weaker confidence, and fading impact of earlier trade-in schemes. Fiscal support has so far been limited given robust headline GDP in H1 2025, where net trade contributed 1.7 percentage points, but this boost will fade.
Some fiscal measures could emerge later this year, though their impact on 2025 growth would be modest and felt more in 2026. Persistent downward pressure on prices highlights structural overcapacity and muted demand, with profit margins across industries squeezed and nominal GDP growth slipping to 3.9 per cent in Q2, the weakest since the 2020 pandemic shock.
Beijing’s efforts to curb ‘involution’—cut-throat competition pushing down prices—have only partly slowed producer price declines, and the fundamental demand-supply imbalance remains unresolved.
Across Asia-Pacific, growth has held up in H1 2025 thanks to resilient domestic demand and strong exports, particularly of tech products and components from Southeast Asia and Taiwan, fuelled by global AI-related investment in data centres and equipment.
Domestic consumption has been robust in most emerging markets, supported by healthy labour markets, low inflation, and policy easing, while investment has been buoyant in India, Malaysia, and Taiwan. India’s growth is projected to hold at 6.5 per cent in FY25, supported by a benign monsoon, GST and income tax cuts, and accelerating government capex, though private investment remains subdued.
In Southeast Asia, GDP growth is expected to ease to an average of 4.5 per cent in 2025, with similar below-trend levels likely in 2026 as the impact of US tariffs deepens.
US tariffs remain a key external headwind, weighing on trade, investment, and growth both within the US and globally. The latest tariff schedule has left China slightly better off relative to earlier expectations but still facing much higher effective US tariffs compared to the pre-2018 period. Southeast Asian emerging markets are experiencing somewhat higher effective tariffs, while India is facing much sharper increases than anticipated, potentially undermining its manufacturing export ambitions.
Developed Asia’s exposure remains broadly in line with projections. The risk of further tariff adjustments is significant, particularly with Washington’s plans to curb transshipment and re-routing of shipments to avoid duties.
Monetary conditions are becoming more supportive across the region. Inflation has been easing since early 2024, helped by softer commodity and energy prices, allowing regional central banks to cut policy rates by an average of 55 basis points so far in 2025.
Currency appreciation against the US dollar has been strong for most Asia-Pacific economies since late 2024, particularly for the Malaysian ringgit and Thai baht, though some currencies softened slightly in Q3. With US policy rates expected to fall further, S&P anticipates additional rate cuts in Asia, particularly where inflation is below target.
In India, inflation has dropped faster than expected, to 3.2 per cent for FY25, creating space for a 25 bps rate cut by the Reserve Bank of India. Japan is expected to continue gradually raising rates as inflation converges toward the BOJ’s 2 per cent target, supported by narrowing wage-price gaps.
As a region heavily exposed to external trade, Asia-Pacific will feel the negative impact of rising trade barriers. Still, relatively solid domestic demand should cushion the blow.
Fibre2Fashion News Desk (HU)
Industry stakeholders said the Budget signals a transition away from volume-driven growth towards a value-led, low-carbon and traceable textile ecosystem, supported by initiatives such as the Text-ECO initiative, the National Fibre Scheme, Samarth 2.0, and sustainability-linked capacity building.
Indian textile industry has welcomed the Budget for its strong focus on sustainability, circularity and responsible manufacturing.
Industry leaders said the measures signal a shift towards value-led, low-carbon and traceable growth.
Initiatives such as Text-ECO, Samarth 2.0 and the National Fibre Scheme are seen as strengthening competitiveness, skills and sustainable sourcing across the value chain.
Shruti Singh, Country Director–India at Canopy Planet, said, “This Budget creates enabling conditions for India to lead in manufacturing of low carbon textile fibres and paper packaging. Investing in circular material ecosystems can meet business ESG goals, create domestic fibre security and global export competitiveness,” she said. Singh added that as demand grows across textiles, packaging and paper-based applications, the real test will lie in responsible sourcing. “For companies linked to forest-based supply chains, this is a moment to strengthen traceability, reduce deforestation risk, and move sustainability from intent to execution,” she noted.
From a fashion brand perspective, Amar Nagaram, co-founder of Virgio, said the Budget clearly links sustainability with innovation and design-led growth. “India’s next phase of growth will be driven by the convergence of design, technology and sustainability. The emphasis on sustainable textiles, MSME scale-up, AI-led innovation and design education reflects a long-term vision to move Indian manufacturing up the global value chain,” he said. Nagaram added that the policy direction supports responsible production, data-driven decision-making, and positions India as a credible global hub for future-ready fashion and lifestyle businesses.
At the manufacturing end, Sabhari Girish, chief sustainability officer at Sulochana Cotton Spinning Mills, Tiruppur, said that sustainability and circularity receiving prominence in the Budget is encouraging for the sector. “Circularity and sustainability taking a prominent spot in the Budget speech is a positive signal. The announcement of Text-ECON will help Indian textile companies showcase their environmentally friendly contributions to the world,” he said. Girish noted that upcoming FTAs with the UK and EU are expected to sharpen the focus on sustainability, adding that Samarth 2.0 will play a critical role in skilling the workforce with updated technologies across the value chain, from fibre to garments.
He also pointed out that the National Fibre Scheme could enhance the quality and global competitiveness of Indian-made fibres, though capital-intensive modernisation will require a clear funding roadmap. “Adopting best practices needs more support, and a proper roadmap will help indigenous fibres take centre stage,” Girish said, while welcoming the proposal to upgrade sports goods manufacturing as a boost for R&D and technical textiles.
Industry experts said the Budget’s sustainability-led approach aligns closely with stricter environmental regulations in markets such as the EU and UK, and could strengthen India’s positioning as a responsible, compliant and future-ready sourcing destination.
Fibre2Fashion News Desk (KUL)
“President Trump’s leadership is forging a new direction for trade that promotes partnership and prosperity in Latin America, further strengthening the American economy, supporting American workers, and protecting our national security interests,” said Ambassador Greer in a USTR release.
USTR Jamieson Greer and Guatemala’s Minister of Economy Adriana Gabriela Garcia recently signed the US-Guatemala Agreement on Reciprocal Trade.
The agreement addresses trade barriers facing American workers and producers, expands and solidifies markets for US exports and strengthens strategic economic ties in the Western Hemisphere, Greer said.
US trade body NCTO welcomed the signing.
The agreement addresses trade barriers facing American workers and producers, expands and solidifies markets for US exports and strengthens strategic economic ties in the Western Hemisphere, he said.
“This agreement builds on our long-standing trade relationship and shared interest in reinforcing regional supply chains,” he added.
The key terms of the agreement includes breaking down non-tariff barriers for US industrial and exports, advancing trade facilitation and sound regulatory practices; protecting and enforcing intellectual property; preventing barriers for digital trade; improving labour standards; strengthening environmental protection; strengthening economic security alignment; and confronting state-owned enterprises and subsidies.
Guatemala has committed to take steps to restrict access to central level procurement covered by its free trade agreement commitments for suppliers from non-free trade agreement partners, permitting exemptions as necessary, in a manner comparable to US procurement restrictions.
Welcoming the announcement, National Council of Textile Organizations (NCTO) president and chief executive officer Kim Glas said the agreement marks an important step toward strengthening the US textile supply chain.
“Guatemala is a key partner in the CAFTA-DR [Dominican Republic-Central America-United States Free Trade Agreement] region, with nearly $2 billion in two-way textile and apparel trade. Together, the region operates as an integrated co-production platform that is essential to the US textile supply chain,” he noted.
The US-Western Hemisphere textile and apparel supply chain remains ‘a critical strategic alternative’ to China and other Asian producers, he added.
Fibre2Fashion (DS)
Canada could boost long-term economic output by nearly 7 per cent if it dismantles policy-related barriers that restrict the movement of goods, services, and labour across provinces, according to new analysis by the International Monetary Fund (IMF).
Despite being one of the world’s most open economies globally, Canada’s internal market remains fragmented, with non-geographic barriers equivalent to an average 9 per cent tariff nationwide.
Canada could raise long-term GDP by nearly 7 per cent by removing internal trade barriers that restrict interprovincial movement of goods, services, and labour, new analysis shows.
Policy-related frictions act like a 9 per cent internal tariff nationwide.
Liberalising high-impact sectors could deliver productivity-led gains worth about C$210 billion (~$153.04 billion).
Model-based estimates suggest that fully removing these barriers could add around C$210 billion (~$153.04 billion) to real GDP over time, driven largely by productivity gains rather than short-term demand, IMF said in a release.
While full liberalisation will be gradual, targeted reforms in high-impact sectors could deliver sizable benefits and improve economic resilience. Analysts argue that stronger federal–provincial coordination, wider mutual recognition of standards and credentials, and transparent benchmarking of internal trade barriers will be key to turning Canada’s fragmented domestic market into a more integrated national economy.
Fibre2Fashion News Desk (HU)
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