The ratings agency said the new tariffs would hinder the “China 1” strategy, and that supply chain diversification away from China is unlikely to accelerate at this stage.
KUALA LUMPUR: The sweeping United States tariffs will be credit negative for Asia-Pacific (Apac), but lower-tariff countries such as Malaysia, India and the Philippines may gain market share through trade triangulation to serve the US market, according to Moody’s Ratings.
In its latest report, the international ratings agency said the new tariffs would hinder the “China+1” strategy, and that supply chain diversification away from China is unlikely to accelerate at this stage.
However, Apac economies may still be incentivised to deepen intra-regional trade and investment ties.
“Lower-tariff countries in the region may stand to gain market share on the margin from potential trade triangulation to serve the US market in the near term.
“For example, Malaysia (A3 stable), India (Baa3 stable) and the Philippines (Baa2 stable), which are subject to tariff rates in the middle band (10%-30% range), may benefit from some trade diversion activity,” it said.
Moody’s Ratings added that economies with large domestic markets, such as India, could benefit as companies seek to access substantial consumer bases while keeping operating costs low by shifting production to these economies, though such developments are expected to unfold over several years.
It noted that economies subject to the lowest tier of tariffs, the 10% baseline, such as New Zealand (Aaa stable), Australia (Aaa stable) and Singapore (Aaa stable), would not be spared.
“While these economies face a smaller direct shock from US tariffs, these economies, Singapore in particular, have high exposure to a global trade slowdown,” it said. — Bernama
