At Any Rate Fixed Income: The US-China Détente: Implications for Asia
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May 15, 2025 
Haibin Zhu, Chief China economist at J.P. Morgan, and Ayako Fujita, Chief Japan economist at J.P. Morgan, discuss the recent temporary roll-back of tariffs between the U.S. and China and its effects on Asia's economies. They explore the potential permanence of this truce and the implications for trade with Japan and Korea. The conversation dives into the complexities of trade negotiations, currency accords, and the Bank of Japan's monetary policy, highlighting regional challenges and cautious optimism for recovery amidst geopolitical tensions.
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US-China Tariff Rollback Boosts Asia
- The US-China temporary tariff rollback significantly lowers average US tariffs on China from 24% to 14%.
- This trade truce reduces US recession odds below 50%, improving Asia's growth outlook, especially after high tariffs hit the region hard.
Detailed US-China Tariff Breakdown
- The effective US tariff on Chinese imports recently dropped to about 41% after removals and suspensions, with China's tariffs on US goods at 28%.
- The US-China tariff dynamics remain complex, including exceptions like fentanyl tariffs and sector-specific rates.
Tariff Cuts Fuel China Growth
- Each 10 percentage points of tariff increase drags China’s growth by about 0.5%, but very high tariffs have nonlinear, diminishing effects.
- The tariff cut is expected to boost China’s growth by about 1.5 percentage points and reduce the need for further fiscal stimulus.