US–APAC trade deals offer stability, modest GDP boost: Fitch

The recent series of bilateral trade agreements between the US and several Asia-Pacific (APAC) countries have reduced uncertainty around the outlook for Asia’s exporters and could provide a slight lift to gross domestic product (GDP) over the next few years for the countries involved, according to Fitch Ratings.

Between October 20 and 30, the US finalised trade pacts with China, Japan, Korea, Vietnam, Malaysia, Thailand, Australia, and Cambodia. The most notable change is the halving of the 20 per cent US tariff on Chinese goods linked to fentanyl-related categories, effectively lowering China’s average tariff rate by around 10 percentage points (pps), Fitch said in its latest commentary.

Both nations have also agreed to pause new restrictions on critical exports—such as China’s rare earth curbs and the US licensing expansions—creating a temporary reprieve in escalating trade tensions.

US-APAC trade deals with eight nations, including China, Japan, Korea, and Vietnam, ease uncertainty and may modestly lift regional GDP, according to Fitch Ratings.
The halving of US tariffs on Chinese goods and paused export curbs could boost confidence and investment.
Benefits will be gradual and uneven, with India still excluded and fiscal risks rising in some APAC economies.

Fitch expects the new arrangements to provide a mild uplift to growth in China, the US, and indirectly to key export-oriented economies like Korea and Vietnam during 2026–2027. Greater tariff stability is anticipated to restore business confidence, enabling medium- and long-term supply-chain investments, particularly in Malaysia, Thailand, and Vietnam. Meanwhile, new commitments on rare earth sourcing could attract investment into Southeast Asia and Australia, though the macroeconomic impact will be modest in the near term.

Fitch foresees Korea’s export growth slowing in 2026 due to lingering US tariffs and softer demand from China. Japan and Korea’s promised investments in US industries may also pressure foreign-exchange reserves and carry sovereign credit implications if executed aggressively.

Several APAC economies, including Indonesia, Korea, the Philippines, and Thailand, have adopted looser fiscal policies to offset risks from US tariff actions. Fitch warned that such fiscal expansion could hinder debt consolidation efforts, a key rating sensitivity for these sovereigns.

India remains outside the recent deal framework, leaving its exports exposed to a 50 per cent US tariff—significantly higher than for most other Asian partners. The absence of a deal may weaken its competitiveness, though discussions for a future accord are ongoing.

Fitch concluded that while the US–APAC trade deals mark a stabilising shift after years of volatility, the benefits will be gradual and uneven. Key uncertainties—tariff implementation, investment follow-through, and geopolitical risks—will determine whether the agreements translate into sustained regional growth.

Fibre2Fashion News Desk (SG)