Seoul: Asia-Pacific economies face a greater shock from U.S. President Donald Trump's tariff policy than others as they are highly open and oriented towards trade in goods, and participate more in global supply chains, an official at the International Monetary Fund (IMF) said Thursday.
According to Yonhap News Agency, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, made the remarks, underscoring the need for Asian economies to bolster domestic demand, as South Korea, Japan and others are striving to navigate a growing list of the Trump administration's new and future tariffs.
"The region is both significantly exposed to the shock and faces a larger shock than other regions," he told a press conference. "Trade uncertainty has also increased materially since January, which has further worsened the near-term outlook for the region."
The official outlined a set of reasons why Asia is particularly exposed to Trump's trade policy shocks. "Many Asian economies are very open and oriented towards trade in goods," Srinivasan said.
He added that Asian economies have continued to increase their participation in the global supply chain in recent years with rising exposure to U.S. demand. "The share of value added exports to the U.S. has increased both directly and indirectly through global supply chains," he said.
Srinivasan also commented on the IMF's recent downgrading of its growth forecast for South Korea to 1 percent for this year. "In Korea, growth is revised downward by a full percentage point, reflecting heightened global trade tensions and domestic policy uncertainty," he said. "The outcome for the first quarter in Korea kind of attests to the fact that growth is slowing both because of domestic demand weakness and exports coming down quite sharply."
Responding to a question over how Asian economies should address tariff shocks, the official said that there is greater potential for more intra-regional trade, and that they need to prop up more domestic demand. "There is the need to rebalance towards domestic demand so that the model of growth is much more balanced," he said.