KUALA LUMPUR: Moody’s Analytics projects that global tariffs imposed by the Donald Trump administration will peak by the end of 2025, with tariffs on China rising to 40 per cent from the current 20 per cent.
Its chief Asia Pacific (APAC) economist, Steve Cochrane said that the total effective tariff for the rest of the world (excluding China) will hit 10 per cent by the end of this year.
During today’s "Trump’s Trade Policy Impact on Asia” webinar, he said the world-ex-China tariffs will return to pre-tariff levels by the end of 2026 at an average import tariff rate of 2.0 per cent
Meanwhile, tariffs on China will gradually decrease and stabilise around 10 percentage points higher by the end of 2027.
"The reason we expect the peak to occur by the end of 2025 is that it takes time to implement these tariffs and begin collecting revenue from them.
"It was interesting that in yesterday's inaugural address, President Trump did not specifically mention tariff levels, except for Canada and Mexico.
"Instead, everything else is being delegated to his advisors, who will assess tariffs on a country-by-country basis for maximum effectiveness,” he said.
Cochrane also highlighted that during the Trump administration starting in 2018, the tariffs war did not last long.
"By 2019, the United States economy began to feel the effects of higher tariffs. This was not only due to the tariffs themselves but also the reciprocal actions taken by China, such as imposing tariffs on agricultural goods shipped from the US to China. These measures had a significant impact on the US farm economy, particularly in terms of demand.
"China also began sourcing from South America for several commodities, particularly soybeans, so the costs became measurable,” he said.
Cochrane also said that following negotiations between the US and China, some tariffs were reduced under the Phase One trade agreement, making the situation more manageable for both countries.
Regarding the economic impact, he said the tariffs will reduce US growth by about three-tenths of a percentage point in 2026 gross domestic product (GDP).
In November 2024, with no tariff assumptions, Moody’s Analytics projects US GDP growth of over 2.0 per cent in 2025 and 2.0 per cent in 2026.
For China, tariff impacts will subtract roughly half a percentage point of GDP growth in both 2025 and 2026, Cochrane said, adding that real estate and export-oriented industries are expected to hurt the most.
Moody’s Analytics head of Asia economics, Katrina Ell stated that the currency market in Asia has already felt the impact of the Trump tariffs.
"We have seen the US dollar strengthen significantly since November, partly due to Trump’s win. The expectation is that his policies will be more inflationary than the alternative.
"This implies fewer rate cuts for the remainder of the year, as well as a more volatile period for global trade. Additionally, the greenback is seen as a more attractive haven asset,” she noted.
Moody’s Analytics also foresees the crude Brent price to hover at about US$79 a barrel by the end of 2025.
Cochrane said weaker oil prices are going to persist into 2026 and early 2027.
"We forecast that it will fall to a low of just under US$70 in early to mid-2027.
"When we get through all this volatility and uncertainty and the global economy perhaps begins to accelerate, demand accelerates, we get back into a long-term trend of US$70-US$75 a barrel through the end of the decade,” he said.
He emphasised that one risk to this outlook is that supply may be diminished more than expected.
"New sanctions are being placed on an increasing number of ships transporting oil from Russia, particularly to China and India. This could reduce supply, which would slightly elevate prices.
"Bottom line: There will be some impact on energy prices from this baseline scenario of increased tariffs globally, and we have factored that into our forecast as well,” Cochrane said. - Bernama
