New US-Asia trade deals ease uncertainty, offer modest growth boost: Fitch

A recent wave of bilateral trade agreements between the United States and several Asia-Pacific countries has eased uncertainty about the region’s export outlook and could provide a modest boost to economic growth in the years ahead, according to Fitch Ratings.

However, many details of the deals remain unclear, and tariff rates could still change.

Between Oct. 20 and Oct. 30, the U.S. announced new trade deals with China, Japan, South Korea, Vietnam, Malaysia, Thailand, Australia and Cambodia. The biggest economic impact is expected from the halving of the 20% U.S. tariff on fentanyl-related goods from China, which would lower Washington’s effective tariff rate on Chinese imports by roughly 10 percentage points.

The U.S. and China have also agreed to pause for one year their recent trade restrictions, including China’s curbs on rare earth exports and the U.S. extension of export licensing rules to companies majority-owned by entities on its restricted lists.

“We expect these developments to have a small positive impact on economic growth in China and the U.S. over 2026-2027,” Fitch said in a report.

Other Asian economies, particularly South Korea and Vietnam, are also expected to benefit from stronger demand in China and the U.S., though the overall direct growth boost will be limited.

Fitch said greater clarity on tariffs should improve exporters’ confidence in long-term supply chain planning, supporting investment in export-heavy markets such as Malaysia, Thailand and Vietnam.

The deals also signal U.S. support for expanding rare earth mining outside China, potentially spurring investment in Southeast Asia and Australia. Still, Fitch noted that the broader macroeconomic impact is unlikely to be significant in the near term.

“We maintain our view that higher U.S. tariffs will dampen import demand and slow Asia’s export growth in 2026,” the report said.

The new trade agreements have narrowed U.S. tariff differentials among major Asian exporters, reducing the likelihood of tariff-driven supply-chain shifts within the region. India, however, remains an outlier, as it has yet to strike a deal with Washington. Its 50% tariff rate is now much higher than those faced by other Asian exporters, although negotiations are ongoing.

Even after the latest agreement, U.S. tariffs on Chinese goods remain higher than those on imports from most other countries.

Under the new terms, the U.S. has reduced tariffs on Korean car and auto parts imports to 15% from 25%, bringing them in line with Japanese and European Union products. South Korea also secured a commitment that any semiconductor tariffs would not disadvantage it compared to Taiwan. Still, both Korean and Japanese automakers continue to face tariff-related hurdles, and Fitch expects Korea’s export growth to slow in 2026 as higher U.S. tariffs and weaker Chinese demand weigh on sales.

Large-scale investment pledges by Japan and South Korea in the U.S. could face implementation delays, and Fitch warned that Korea’s sovereign credit profile could be affected if such investments significantly reduce its foreign-exchange reserves. The treatment of transshipments in the new deals also remains unclear, posing potential risks for future trade frictions.

Meanwhile, several Asia-Pacific governments, including Indonesia, South Korea, the Philippines and Thailand, have adopted looser fiscal policies to offset potential growth risks stemming from U.S. trade actions in 2025. Fitch said this could slow fiscal consolidation and affect debt trajectories, which remain a key sensitivity for some sovereign ratings in the region.