KUALA LUMPUR: US trade and foreign policies will have the greatest impact on Asia-Pacific (APAC) region economies, with US -China relationship taking centrestage, said Moody's Ratings.
Its policies will impact credit and economic conditions, primarily through trade and investment channels.
The firm said that trade and foreign investment flows may increasingly move away from China as the US imposes further restrictions on investments in strategic sectors.
Additionally, global companies are likely to reduce their exposure to China due to these US restrictions and tariffs.
"India and ASEAN countries stand to benefit from those redirected flows. But if more restrictive US measures slow China's exports and gross domestic product (GDP) growth, the slowdown will ripple across APAC economies with strong links to China," it added.
The agency highlighted that the US-China relationship will remain central to the region, likely continuing to be strained due to ongoing competition in trade and technology, as well as their rivalry for global economic and political dominance.
"Under a Kamala Harris administration, we expect policy continuity on relations with China, including highly tailored and staggered tariffs and investment restrictions on Chinese businesses."
"Under a Donald Trump administration, the current tailored approach could be replaced with overarching blanket trade policies. Trump has proposed a 10 per cent to 20 per cent universal baseline tariff on most imports from the rest of the world and tariffs of 60 per cent on Chinese imports," it added.
Furthermore, the firm said that changes in trade and investment flows are high-probability events with moderate economic effects for APAC and are the main economic risk-transmission channels from US trade policy.
"Since the escalation of US-China trade tensions in 2018, supply chains have been adapting to new trade barriers and political demands."By contrast, geopolitical risks from foreign-policy changes are low-probability, high-impact events for APAC," it adds.