APAC outlook 2026: Tariff drag dominates despite pockets of support

Asia’s growth outperformance this year has been buoyed by frontloaded US orders and strong global demand for technology goods. However, non-tech exports are already losing steam, and the risk of further US sectoral tariffs underscores the vulnerability of the region’s trade recovery.

Against this backdrop, we project regional GDP growth to slow to a below-consensus 3.7% (consensus: 3.9%) in 2026, a step down from the expected 4.3% in 2025. We think three factors will be pivotal in determining the scale of Asia’s tariff-driven slowdown:

• AI-related capex likely still has legs to run, but this tailwind for Asia is uneven and changeable.
• Policy settings will likely stay broadly neutral, but policymakers have space for reactive easing.
• The search for domestic structural growth drivers may intensify.