China’s growth could drop by as much as one percentage point this year if soaring US import tariffs hold up, but its increasingly deep ties with Southeast Asia can help offset that loss, a regional economic surveillance body said on Tuesday.
US import tariffs of 145 per cent on Chinese shipments will limit expansion of the world’s second-largest economy to a “quite optimistic” 4.8 per cent this year, said Hoe Ee Khor, chief economist with the Asean+3 Macroeconomic Research Office (AMRO).
The office made its prediction based on a strong first quarter followed by weak periods, particularly the second half of the year. Beijing has made “around 5 per cent” its official gross domestic product growth target for 2025.
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“With the new tariff of 145 per cent, exports are going to be hit quite hard,” Khor said at a news conference on Tuesday. “The tariff will definitely cause exports from China to drop substantially.”
The economic surveillance office, which tracks developments in China, Japan, South Korea and the 10-member Association of Southeast Asian Nations (Asean) bloc, said Chinese reliance on the US market – which provided some US$525 billion in export value in 2024 – will set it back this year and next if the US tariff rate does not change, with a projection of 4 per cent GDP growth in 2026.
US President Donald Trump has launched a protracted trade conflict with China, sending tariff rates through the stratosphere and leading to rates of 125 per cent being imposed by Beijing in reply. While there have been recent, perhaps temporary, exemptions allowed for certain goods, it is unclear how the landscape will evolve.
China’s increasingly tight trade and investment ties with Southeast Asia will help fill the void left by limited access to the US market, AMRO economists said at the conference.
Investments from China in the Asean economies, which have a combined population of 698 million, are continuing to grow and will help both sides shed their US exposure, Khor said.
He pointed to solar panels, electric vehicles and batteries as items Chinese firms can supply in greater volume to the region.
China also ships raw materials to Southeast Asia for use in manufacturing, and many of its companies operate in industrially intensive countries such as Vietnam to save costs while avoiding US tariffs.
The office estimated Chinese direct investment in Asean has doubled since the pandemic.
“It’s not just about China selling to Asean, it’s about creating a more integrated regional economy,” said AMRO’s principal economist Allen Ng at the conference.
Just 12 per cent of the exports from AMRO’s coverage region would fall under Trump’s worldwide “reciprocal tariff” regime at present. Most of the duties the US president announced on April 2 have been put on pause for 90 days, as Asean members such as Singapore and Vietnam negotiate with the US over their trade policy.
The Asean countries, China, Japan and South Korea have all pared down their reliance on the US, AMRO said – from 24 per cent of their exports in 2000 to less than 15 per cent now – while trade among these countries has grown threefold over the same period.
“China can play a major role in terms of diversification of economies by helping to invest in new industries and also helping them diversify away from the US market as necessary,” Khor said.
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