On December 11, the Asian Development Bank (ADB) released its annual report titled “Asian Development Outlook” (ADO), indicating that the economic growth of the Asia and Pacific regions is projected to remain stable this year and the nextHowever, the report warns that policy changes anticipated in the United States could significantly affect the long-term economic prospects for these regions.

Changes in trade, fiscal, and immigration policies introduced by the U.Scould weaken the growth momentum of developing economies in Asia and the Pacific while heightening inflationary pressuresSuch shifts are expected to have a delayed effect, likely becoming clearer around 2026. Nonetheless, should the U.Simplement these changes rapidly or if American businesses increase imports to avoid tariffs, the consequences might be felt sooner.

In the report, the expected economic growth rate for developing economies in Asia and the Pacific for 2024 is estimated at 4.9%, slightly lower than the previous forecast of 5.0% made in September

For 2025, the growth outlook has been reduced from 4.9% to 4.8%, primarily due to weaker domestic demand in South Asia.

The uncertainty surrounding U.Spolicies also features prominently in the reportThe nature, scale, and pace of any potential policy changes under a new administration remain highly unpredictableIn terms of trade policy, there have been proposals for imposing tariffs ranging from 10% to 20% on imports from all economiesHowever, the report cautions that these proposals might serve mainly as starting points for negotiations rather than firm policy objectivesA more protectionist stance might ensue, leading to a review of existing trade agreements, including the United States-Mexico-Canada Agreement, and the introduction of a carbon border adjustment tax.

Implementing new trade tariffs is likely to require legislative action, meaning that they might not come into effect until the third quarter of 2025, with potential phased implementation

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While tariffs might initially help improve trade balances, they could also drive up inflation and hinder GDP growth within the U.SInitially, tariffs may reduce imports and diminish trade deficits, yet demand shifting from foreign goods to domestic products might elevate wages and prices, especially as the American economy approaches full employment.

To counter inflation, the Federal Reserve might opt for tighter monetary policiesAdditionally, retaliatory tariffs from trade partners could further suppress U.Sexports, negating some of the positive impacts tariffs might have on the trade balanceProlonged tariffs could lead to a significant restriction of U.Seconomic activity; calculations suggest that if Canada and Mexico impose retaliatory tariffs on U.Sgoods, the sharp rise in tariffs could result in a GDP growth rate reduction of over 1 percentage point by 2025.

The report emphasizes that even in the absence of the proposed tariffs, merely increasing trade uncertainty could substantially impact the U.S

economyData show that during the first term of the previous administration, the rise in trade policy uncertainty in just one year, 2018, led to a decline in U.Sinvestment between $23 billion and $47 billion.

Turning to immigration policy, which focuses on curbing illegal immigration, possible measures include repatriating up to one million undocumented migrants per year, reducing refugee intake, resuming construction of the U.S.-Mexico border wall, ending "catch and release" policies, utilizing military resources to secure borders, and reinstating the "Remain in Mexico" policyLegal standards for immigration could also be tightenedA net decrease in immigration would result in a reduced labor supply in the U.S., potentially constraining economic growth over the medium termLow-skilled sectors such as agriculture, construction, hospitality, food services, and personal services may bear the brunt of these changes

In the short term, some potential migrants may preemptively move to the U.Sto avoid impending restrictions.

Fiscal policies may see potential implementations targeting the elimination of taxes on tips, overtime pay, and social security benefits, alongside further reductions to the corporate tax rate for manufacturing companies down to 15%. Increased spending in both defense and other sectors is anticipatedAlthough revenue from tariffs and cuts to climate-related policies and social safety nets could offset some of these expansionary fiscal measures, overall projections indicate a continued increase in the budget deficit, which currently stands at approximately 6.5% of GDP, and a rise in federal debt as a percentage of GDP surpassing 100%.

The report suggests that there could be a shift towards a more dovish Federal Reserve, as some advisors have implied that current Chair Jerome Powell should resign

This further strengthens expectations that he may be replaced by a more peace-oriented successor by early 2026. Furthermore, the U.Senvironmental policies may trend away from being “green,” causing stock prices of renewable energy and climate technology firms to plummet following the announcement.

Moreover, the report predicts that the agenda to deregulate banks, energy, and climate policy may continue from the first termIf these deregulations occur, they could enhance corporate confidence in the competitive landscape, which might spur economic activityThe acceleration of U.Seconomic growth could, through trade channels, also provide varying benefits to developing economies within Asia and the Pacific.

According to the report’s baseline scenario, the significant proposed policies will have limited immediate impacts on developing economies in Asia in 2024 and 2025. The U.S

economic growth is not expected to experience noticeable changes until after 2026, and the impacts are projected to be relatively mildA slight increase in global inflation is also anticipated, albeit moderate.

In a risk scenario, aggressive policy changes that the U.Smight implement could result in a cumulative decrease in global economic growth by approximately 0.5 percentage points over the next four yearsThe cumulative GDP growth in the U.Smay drop by 0.7 percentage points, while Asian developing nations could see a decline of around 0.6 percentage pointsThe Eurozone and Japan could experience smaller reductions in growth, at 0.4 and 0.5 percentage points respectively.

Nonetheless, due to the delayed effects of fundamental policy changes, the influence on economic growth won't be immediate; most economies are expected to start feeling the effects around 2027. However, the growth dynamics in the U.S