Asia’s resilience to U.S. tariffs is at risk if the supportive financial conditions that have helped so far reverse, a senior IMF official warned.
Krishna Srinivasan, the IMF’s Asia director, said low interest rates and a weak dollar have allowed Asian economies to weather the tariff shock and borrow cheaply.
But he warned these favourable conditions may not last.
- If interest rates start rising… that could have a significant impact on Asia, where debt servicing costs… has been pretty high,
- adding that a dollar appreciation is also “a big risk.”
The IMF’s regional outlook upgraded 2025 growth for Asia to 4.5%, citing strong, tariff-related exports. However, the report warned risks are tilted to the downside, projecting a slowdown to 4.1% in 2026.
Srinivasan praised Asian central banks for managing inflation due to their independence, but stressed they must remain focused on price stability and not be “burdened with multiple mandates.”
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This IMF warning acts as a significant risk-off signal for Asian assets, directly challenging the recent optimism in the region. It implies that Asian currencies (like the won, baht, and rupiah) are vulnerable to a sharp reversal against the U.S. dollar. Furthermore, it threatens Asian equity markets (MSCI Asia ex-Japan) by highlighting the dual risks of slowing 2026 growth and rising corporate debt costs, which could squeeze profit margins and deter investment.
This article was written by Eamonn Sheridan at investinglive.com.