India And Japan Least Affected By US Tariffs Due To Strong Domestic Demand: Morgan Stanley

New Delhi, Mar 31 (KNN) India and Japan are the least exposed economies to US trade tariffs due to their strong domestic demand, according to a Morgan Stanley report released on Friday.

The report emphasizes that the ratio of goods exports to GDP is a crucial metric in assessing an economy's trade dependence and potential exposure to global trade policies.

"The ratio of goods exports to GDP is the most important metric as it determines the extent of trade orientation of an economy. This allows global research firms to assess which economies will face greater downward pressure on growth," the report stated.

"India and Japan have robust tailwinds from strong domestic demand, which helps offset external trade risks. Additionally, both economies have relatively lower ratios of goods exports to GDP," the report added.

The US has implemented a 25 percent tariff on auto imports, which is expected to impact Japan and South Korea the most, as auto exports to the US account for 7 percent of their total exports.

On April 2, the US administration is expected to propose a plan to address reciprocity in trade relations.

It has also signalled its intention to impose sectoral tariffs on energy, pharmaceuticals, semiconductors, agriculture, copper, and lumber.

"The potential implementation of these tariffs will directly impact almost all economies in Asia, either through country-specific tariffs or sectoral tariffs,” the report mentioned.

However, our key concern remains that elevated levels of policy uncertainty will weigh on capital expenditure and trade, ultimately damaging the business cycle," the Morgan Stanley report said.

Within Asia, Japan, South Korea, and China contribute the largest share of this deficit. These three economies rank second, third, and fourth among the top 10 countries with which the US runs the largest autos deficits.

For Japan and Korea, most of the deficit comes from vehicle and non-battery auto parts exports. In contrast, for China, the majority of the deficit stems from EV battery exports, according to the report.

Takeshi Yamaguchi, Chief Economist for Japan, observed that if the 25 percent auto tariff remains in place for a prolonged period and auto exports to the US decline by 15-30 percent, it could negatively impact Japan's GDP growth by 0.2-0.3 percentage points.

(KNN Bureau)