US tariffs set to tighten margins for APAC manufacturers

The firm forecasts increased competitive pressure within the region's manufacturing sector.

US tariff hikes are set to squeeze growth prospects for Asia-Pacific manufacturers, particularly as Chinese firms seek new export markets in the face of growing trade barriers, according to a new report by S&P Global Ratings.

The report, titled “US Tariffs Will Squeeze, Not Choke, Growth In Asia-Pacific,” forecasts increased competitive pressure within the region's manufacturing sector as Chinese producers redirect exports originally bound for the US toward other Asian markets.

“Asian manufacturers will feel pressure from Chinese manufacturers, as Chinese producers seek alternatives to the US market,” said Louis Kuijs, Asia-Pacific Chief Economist at S&P Global Ratings. He noted that the intensified competition may displace existing players in the region and reshape trade dynamics.

Whilst some Asia-Pacific economies—such as Australia, Indonesia, New Zealand, and the Philippines—are less directly exposed to US tariffs on sectors like automobiles, pharmaceuticals, and semiconductors, S&P cautioned that the broader impact of trade friction and uncertainty will ripple across the region.

Export-driven manufacturing hubs are particularly vulnerable to weaker global demand resulting from trade slowdowns. The report also suggests that deglobalisation trends, combined with geopolitical fragmentation, will place long-term structural pressure on supply chains and manufacturing networks across Asia.

Despite the squeeze, S&P said the region is unlikely to face a collapse in growth. Instead, the challenge lies in navigating a more contested and fragmented trade environment, with reduced margin for error in export-reliant sectors.