Fitch Ratings: The recent series of bilateral trade agreements between the US and several APAC countries reduce uncertainty around the outlook for Asia’s exporters, and could provide a slight lift to GDP over the next few years for the countries involved. However, many details are still to be clarified, and tariff rates remain subject to change.

Over 20-30 October, the US announced deals with China, Japan, Korea, Vietnam, Malaysia, Thailand, Australia and Cambodia. The greatest economic impact is likely to stem from a halving of the 20% fentanyl-related US tariff on China; this would reduce its effective tariff rate on China by around 10pp, other things being equal. The US and China have also agreed to pause for one year their recent tightening of trade restrictions, involving China’s curbs on rare earth exports, the US extension of export licensing requirements to companies majority-owned by entities on its key restriction lists, and higher bilateral tariffs.

We expect these developments to have a small positive impact on economic growth in China and the US over 2026-2027. Some other Asian countries, especially Korea and Vietnam, should also see an uplift through the influence of stronger demand in China and the US, although in general the deals’ direct boost to growth will be more limited.

Greater clarity about tariffs should strengthen exporters’ confidence in planning medium- and long-term adjustments to supply chains. This, in turn, could support investment growth, particularly in markets with significant exports to the US, such as Malaysia, Thailand and Vietnam. The trade deals indicate strong US support for the expansion of rare earth mining in non-China markets and could help drive investment in that sector in Southeast Asia and Australia, though we think the macroeconomic impact is unlikely to be significant in the next few years.

We maintain our view that higher US tariffs will dampen US import demand and slow Asia’s export growth in 2026. Recent trade deals have moderated US tariff differentials between major Asian exporters, reducing prospects for tariff-driven supply-chain shifts within the region. However, India has yet to secure a trade deal with the US. Its 50% tariff is now significantly higher than those faced by most other Asian exporters - though the two countries may still reach an agreement in the near future. US tariffs on China also remain higher than those on most other countries, even after the latest agreement.

The reduction of the US tariff on car and auto parts imports from Korea, to 15% from 25%, brings it into line with that on similar Japanese and EU products. Korea also appears to have secured a commitment that any tariffs on semiconductors will not disadvantage Korea relative to Taiwan. Nonetheless, Korean and Japanese auto producers continue to face tariff-related challenges, and we expect Korea’s export growth to slow in 2026 as higher US tariffs and a slowdown in China hit sales.

Pledges by Japan and Korea to invest large sums in the US could face implementation challenges, but we can not rule out an impact on Korea’s sovereign credit profile if such investments lead to sharp reductions in its foreign-exchange reserves. These investments, as well as the broader lack of clarity in the recent trade deals over the treatment of transshipments, are a potential source of future frictions with the US.

Meanwhile, several governments in the region have adopted looser fiscal policy positions, such as Indonesia, Korea, the Philippines and Thailand, in part to offset growth risks posed by the US trade actions in 2025. This may impede fiscal consolidation and affect public debt trajectories, which are an important rating sensitivity for some APAC sovereigns.