The International Monetary Fund (IMF) has called on Asian nations to reduce non-tariff trade barriers and strengthen regional integration to cushion the region from the impact of US tariffs and global economic shocks on Friday.
In its regional economic outlook report for Asia released, the IMF highlighted trade has long been the backbone of Asia’s rapid growth, with China acting as the central hub of global supply chains.
However, this deep interdependence leaves the region exposed to the fallout from US-China trade disputes and President Donald Trump’s tariff measures.
According to the report, trade tensions with the US, combined with a surge in investments in artificial intelligence, have fueled stronger intra-regional trade within Asia.
The IMF said removing barriers and deepening trade ties across Asian economies could help diversify export markets, lower trade costs, and ease the pressure from external tariff shocks.
Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said in an interview with Reuters, “If Asia integrates more within the region, that itself provides you a buffer against external shocks.”
Srinivasan noted about 60% of Asia’s total exports involve intermediate goods traded within the region. In contrast, only 30% of final goods exports stay within Asia, underscoring the region’s heavy dependence on US and European consumers.
The IMF suggested Asia could gain by pursuing broader, region-wide trade frameworks similar to the European Union, as its reliance on multiple bilateral deals often leads to overlapping rules and inconsistent standards.
The report also emphasised reducing non-tariff barriers- many of which surged during the COVID-19 pandemic and remain widespread- would yield significant economic benefits.
Srinivasan described the voluntary reduction of such barriers by some countries during trade talks with the US as a “very positive” sign. He said greater regional integration could lift Asia’s gross domestic product by up to 1.4% in the medium term, while Association of Southeast Asian Nations (ASEAN) economies could see growth gains of up to 4%.
He added, “There is a silver lining in that some countries, which had to liberalise anyway, are now liberalising.”
The IMF projected Asia’s economy to grow 4.5% in 2025- slightly below last year’s 4.6% but 0.6% points higher than its April forecast- supported by robust exports and the acceleration of shipments ahead of expected US tariff hikes.
However, growth, is expected to slow to 4.1% in 2026 amid persistent trade frictions, weakening demand in China, and sluggish private consumption in emerging markets.
The IMF warned, “While trade policy uncertainty has declined somewhat compared to April, it remains high and could weigh on investment and sentiment more than expected.”
