Emerging Asia remains resilient, but not immune, according to a recent outlook report that paints a picture of a region holding its ground under growing global pressure, but increasingly constrained by the gravitational pull of geopolitics, tariffs and a slowing China.

The region is expected to meet GDP growth expectations, but is unlikely to beat them, finds S&P Global Ratings’ ( S&P ) latest outlook, “Will Emerging Asia Beat or Meet Growth Expectations”.

And the US economy, once a tailwind, is now more drag than lift, with policy-driven inflation and a stalling labour market, and the expected rate cuts, possibly beginning in September, notes Louis Kuijs, S&P’s chief economist, being less a green light for growth than a red flag for demand.

At the same time, Trump-era tariffs, now creeping back into the global narrative, Kuijs says, are beginning to bite. Inflation in the US is rising, but tariffs have a deflationary spillover in Asia, particularly in China.

Unsurprisingly, China sits at the fulcrum of this story. Despite a strong first half, driven by a burst of exports and reasonably steady consumption, S&P expects growth to slide below 5% next year, more likely closer to 4%.

The bigger concern isn’t just GDP slowing, but deflation digging in. Profit margins across Chinese industry are narrowing, a reflection of weak pricing power and long-standing structural problems, from zombie firms that refuse to die to patient capital that refuses to discipline.

This weakening Chinese picture, according to Kuijs, isn’t just a domestic story. Its impacts are radiating across the region, not least through intensified competition and softening import demand. Slower China means thinner margins for exporters in Southeast Asia, even as US buyers look elsewhere.

Monetary breathing room

That elsewhere is emerging Asia. But even here, the runway for outperformance, the report notes, is narrowing. Export performance was unexpectedly strong earlier this year, helped by front-loading ahead of tariffs, but that sugar high is fading.

The second half of 2025 looks softer across the board. India and Indonesia, with their large domestic engines, may navigate the coming turbulence better than more trade-exposed economies like Thailand, which face both political fragility and weak external demand.

Still, there are silver linings. Inflation across the region is benign, currencies are stable or appreciating, and several central banks have already begun cutting rates. That gives the region monetary breathing room, a rare luxury in today’s world. More easing is to come, S&P expects, though the impact will depend on how quickly global demand stabilizes.

Credit outlook, points out Eunice Tan, S&P’s Asia-Pacific credit head, echoes the macro view, manageable for now, but fraying at the edges. Tariffs and geopolitical uncertainty, including new US actions on Indian oil trade and semiconductor imports, are weighing on investment confidence.

China’s weak property market and falling corporate margins add to the drag. Structural headwinds are also building, ageing demographics, rising household debt and the narrowing window for productive leverage could all constrain the region’s long-term credit story.

What emerges is a landscape defined by careful calibration rather than clear momentum. Emerging Asia is not “terrified” into inaction, but the region is also not roaring ahead. For now, it is moving just fast enough to meet expectations, but too constrained to surprise on the upside.

Whether that remains good enough will depend on how well domestic policy can pivot, how far trade realignments extend, and how deeply structural reforms take root. In a “tarrified” world, standing still might actually be the new outperformance.