October 24: The International Monetary Fund (IMF) on Friday urged Asian economies to lower non-tariff barriers and strengthen regional trade integration to cushion against the impact of U.S. tariffs and global financial shocks.
Trade has been the backbone of Asia’s economic rise, with China at the centre of global supply chains. But that reliance leaves the region vulnerable to fallout from U.S.-China trade tensions and tariffs imposed by President Donald Trump, the IMF said in its regional economic outlook report for Asia.
“Promoting further regional trade integration, including by removing trade barriers, could help Asian countries diversify export markets, reduce costs, and offset some of the headwinds from tariff shocks,” the IMF said.
“If Asia integrates more within the region, that itself provides you a buffer against external shocks,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, told Reuters.
According to the report, around 60% of Asia’s total exports are intermediate goods traded within the region, while only 30% of final goods exports stay within Asia — a sign of the region’s dependence on U.S. and European markets.
The IMF said Asia would benefit from pursuing broader, multilateral trade agreements akin to the European Union, rather than multiple overlapping bilateral deals that create inconsistent standards. It also urged governments to cut non-tariff barriers, many of which rose during the COVID-19 pandemic and continue to hinder trade flows.
Some countries are already reducing such barriers voluntarily as part of trade negotiations with Washington, a “very positive” trend, Srinivasan said.
The IMF estimated that greater regional integration could boost Asia’s GDP by up to 1.4% over the medium term, and lift ASEAN economies by as much as 4%.
It forecast Asia’s economy to grow 4.5% in 2025, down slightly from 4.6% last year but 0.6 percentage points higher than its April projection, driven by strong exports and front-loading of shipments ahead of new U.S. tariffs. Growth is expected to slow to 4.1% in 2026, weighed down by trade tensions, weak demand from China, and sluggish private consumption in emerging economies.
