Finance ministers and trade representatives from 21 member economies, including the United States and China, issued a stark warning Thursday that collective growth across the Asia-Pacific region is poised to decelerate sharply as tariff measures and policy unpredictability dampen investment and cross-border commerce. At the annual APEC meeting on South Korea’s Jeju Island, delegates received revised projections showing aggregate GDP expansion slipping from 3.6 percent in 2024 to just 2.6 percent in 2025—levels barely keeping pace with population gains and well below the region’s decade-long average.

Speaking at the opening session, Carlos Kuriyama, director of APEC’s Policy Support Unit, laid blame squarely on a wave of new import duties and retaliatory actions. “From broad-based tariff hikes and counter-measures to the proliferation of non-tariff barriers and stalled customs modernization, businesses face an environment that undermines trade,” he cautioned. Kuriyama underscored that heightened uncertainty has prompted firms to freeze capital expenditures, delay factory expansions and postpone product launches until global policy landscapes become more predictable.

The APEC grouping—home to roughly half of world trade and over 60 percent of global GDP—brings together developed and emerging markets alike. In recent months, bilateral and multilateral trade tensions have disrupted supply chains spanning electronics, automotive parts and agricultural goods. Although the 90-day tariff truce announced by the U.S. administration in early April briefly eased fears of escalating duties, many analysts note that the suspension lacks a binding framework, leaving the specter of renewed hikes ever-present.

U.S. Treasury Secretary Janet Yellen, attending her first APEC session, acknowledged that America’s recent “reciprocal” tariffs on steel, aluminum and various manufactured products have prompted similar levies from key partners. While she defended the measures as leverage to secure fairer market access, Yellen agreed that a more constructive dialogue is needed. “Our aim has always been to open markets and address imbalances—not to fracture global commerce,” she said. “We must ensure that trade policies promote growth, not stall it.”

China’s Vice Premier Liu He, representing the world’s second-largest economy, echoed calls for restraint. He blamed “unilateral measures” for disrupting trade flows and urged APEC members to uphold World Trade Organization rules. Liu pointed to China’s own lowering of certain tariffs in recent months—on petrochemicals, consumer goods and auto parts—as evidence of Beijing’s commitment to liberalization. “We cannot afford to retreat behind tariff walls,” he said, warning that fragmented markets would erode efficiency and raise consumer prices across the board.

Several smaller economies at the gathering shared accounts of how U.S. and Chinese tariffs have reverberated through their economies. Malaysia’s Trade Minister Tengku Zafrul Aziz described a downturn in electronics exports after a major smartphone producer shifted orders away from local suppliers. Australia’s Deputy Prime Minister highlighted how uncertainty over Chinese import restrictions on wine and barley has forced winemakers and grain growers to seek alternative markets. Even exporters of niche products—like Filipino coconut oil and Chilean fruit—report that longer shipping routes to skirt tariffs have added weeks to delivery times and eaten into margins.

Beyond direct duties, APEC officials pointed to “behind-the-border” measures—such as sudden changes to product standards, data-localization rules and licensing delays—that act as non-tariff barriers. These measures, often imposed without clear consultation, have increased compliance burdens, especially for small and medium-sized enterprises. According to an APEC survey, 45 percent of SMEs in the region said they had seen trade costs rise by more than 10 percent over the last year due to regulatory uncertainty.

Restoring business confidence, Kuriyama argued, requires a two-pronged approach: first, de-escalating ongoing tariff disputes through binding agreements or clear sunset clauses; and second, accelerating commitments to modernize customs and bolster supply-chain resilience. He highlighted several APEC initiatives under development—such as a digital trade facilitation framework and an expanded network for mutual recognition of standards—that could help reduce transaction times by up to 30 percent.

Former Canadian trade minister Mary Ng, now a private sector adviser, told delegates that predictability is the cornerstone of investment decisions. Companies “need transparent, enforceable rules that let them plan multi-year projects with confidence,” she said. Ng recounted how Canada’s own steel and aluminum industries weathered U.S. tariffs by diversifying into Latin American and Asian markets, but warned that not all nations have the flexibility to absorb similar shocks.

WTO Director-General Ngozi Okonjo-Iweala, also present at the Jeju meetings, emphasized the broader implications of a fractured trading system. She cautioned that if the world drifted into competing trading blocs, global GDP could suffer a long-term decline of up to seven percent. “We must use this forum to identify common ground,” she stressed. “The cost of inaction is too great for families, farmers and manufacturers everywhere.”

Several APEC economies have accelerated efforts to build alternative payment systems and digital-platform infrastructures in response to these disruptions. Southeast Asian nations, in particular, are deepening fintech partnerships to slash cross-border remittance costs, while Pacific nations are exploring blockchain-based solutions to enhance transparency in agricultural supply chains. Japan, leveraging its advanced robotics sector, has proposed a multilateral “smart factory” alliance to help manufacturers quickly reconfigure production lines when tariffs shift cost equations.

Not all members, however, share the same priorities. Latin American economies within APEC have pushed for greater recognition of development needs, arguing that a one-size-fits-all approach to liberalization fails to account for income disparities. During bilateral talks, Brazil and Peru called for “special and differential treatment” to safeguard nascent industries—an appeal that the United States and Japan have cautiously acknowledged but stopped short of endorsing.

Investment patterns have already begun to reflect these frictions. Cross-border mergers and acquisitions in the region fell by roughly 15 percent in the first quarter of 2025 compared to a year earlier, according to data compiled by multiple financial institutions. Corporate boardrooms cite not only trade-policy risks but also growing geopolitical tensions, climate-related supply-chain vulnerabilities and rising labor costs in traditional manufacturing hubs.

In response, some multinational firms report accelerating reshoring of strategic production lines. An electronics manufacturer from Taiwan, for example, announced plans this week to split its assembly operations between Vietnam and Mexico—sidestepping both U.S. tariffs on Chinese imports and regulatory uncertainties in Southeast Asia. Similarly, an Australian mining equipment producer is relocating certain component manufacturing back to Italy to secure EU “origin” status and avoid third-country duties.

The APEC gathering on Jeju culminates with a commitment to finalize an updated “Roadmap for Supply-Chain Connectivity,” which will outline best practices for customs cooperation, digital trade standards and crisis-response coordination. While the roadmap is non-binding, organizers hope it will signal collective resolve to stabilize trade flows. APEC leaders are expected to endorse the document at a summit later this year in Gyeongju, South Korea.

For now, the overarching message from the 21-economy forum is clear: without a swift de-escalation of trade disputes and renewed commitment to transparent, rules-based commerce, the Asia-Pacific region faces a prolonged period of subdued growth. As delegates disperse, businesses and policymakers alike will be watching closely to see whether the rhetoric on Jeju translates into concrete measures—or whether uncertainty continues to cast a shadow over global markets.

(Adapted from ForexFactory.com)

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