A new UN report forecasts a punishing 9.7 per cent drop in Southeast Asian exports to the US, potentially costing the region billions
But for Southeast Asia – a linchpin in global supply chains and a major supplier of American-bound electronics, garments and footwear – the expected drop is a punishing 9.7 per cent.
“Southeast Asia will definitely be hard hit by Trump’s tariffs as much of the region’s growth is tied to exports, especially in sectors like electronics, semiconductors, garments and footwear,” Joanne Lin, a senior fellow at the ISEAS-Yusof Ishak Institute’s Asean Studies Centre, told This Week in Asia.
Both nations were “very dependent on the US” as a market for their exports, he said.
The UNDP report, released on September 18, predicts a 23 per cent plunge in Cambodia’s US-bound exports and a contraction of its entire export sector by a third, given that 58 per cent of Cambodian exports currently head for America.
“Such a shock is deeply consequential for an economy so dependent on trade,” it said.
Vietnam also faces steep losses. With US tariffs on key exports such as apparel, footwear and electronics reaching 20 per cent, the country’s shipments to the US are projected to fall by 19.2 per cent – potentially wiping out US$25 billion in trade, according to the UNDP’s chief economist for the Asia-Pacific, Philip Schellekens.
Last year alone, Vietnam exported US$136.5 billion worth of goods to America, making it the sixth biggest supplier to the world’s largest economy.
“There are reports that Trump is considering a formula that would account for the number of chips in foreign electronic devices,” said Kevin Chen, an associate research fellow with the US programme at the S. Rajaratnam School of International Studies’ Institute of Defence and Strategic Studies in Singapore.
“This would have a serious impact on the semiconductor sector across the region, not only hurting their competitiveness in the US market but also spurring a reallocation of investments towards the US.”
Chen also raised concerns about US action against transshipped goods – those routed through third countries to skirt tariffs – threatening compliance headaches across Southeast Asia, though he noted that it was “yet unclear how Washington will define such goods”.
With exports under strain, observers foresee a broader contraction in trade and investment, the erosion of factory jobs and mounting economic pressures nudging Asean closer to China.
“It is also quite likely that Washington won’t compromise on strategic sectors like chips, which will affect countries like Malaysia, Vietnam and Singapore which are very integrated into global supply chains,” Lin said.
“That pressure could push Asean closer to China as both a market and a partner in trade and investment.”
But the story is not so simple, according to Albayrak. Despite the trade disruption, he said Southeast Asia remained “relatively competitive” compared to regional competitors such as China itself as well as India and Bangladesh, which now face tariffs of 20 per cent and 25 per cent respectively.
Pressure [from Washington] could push Asean closer to China as both a market and a partner in trade and investment
He added that a dramatic pivot towards China was unlikely, as most Southeast Asian economies still see Beijing primarily “as an investor and a provider of intermediate inputs”, rather than a major consumer of their exports.
“The region does not depend heavily on China for their manufacturing exports, and it is hard to see that changing given China’s current manufacturing prowess,” Albayrak said.
But he also tempered expectations, cautioning that not all sectors “will find a suitable market” in China, with semiconductor firms in particular facing fierce local competition.
“In fact, the redirection of China’s exports could easily become a broader issue,” Chen said. “As such, Southeast Asian governments are not putting all their eggs in a China-shaped basket.”
Albayrak argued that Asean should seize the opportunity to broaden trade relationships. “Some in the region, like Singapore and Vietnam, have standing free trade agreements with major alternative markets like the EU. Others could follow suit.”
Observers also see “substantial” scope for deepening intra-Asean trade. “The challenge is that Asean economies often compete in similar products, making integration tricky,” Lin said.
“But if the region can strengthen its internal market and upgrade into higher value-added production, the tariffs could serve as a painful but important push to accelerate diversification and resilience within the grouping.”