BGA Senior Adviser Dr. Thitinan Pongsudhirak wrote a client update on the impacts of the Trump administration’s tariffs on Southeast Asia and ASEAN.

Context

  • When U.S. President Donald Trump’s tariff maelstrom eventually subsides, its longer-term ramifications will be far-reaching for the neighborhood just south of China and east of India, known as Southeast Asia as a region and the Association of Southeast Asian Nations (ASEAN) as its regional organization. For Southeast Asia and ASEAN, which are interchangeable but distinct, the U.S. tariff posture will be divisive and detrimental because it will engender diversionary and competitive effects more than complementarity and connectivity among their economies. For business planners, the time has come to think of this central Indo-Pacific neighborhood more as a Southeast Asian region and less as an ASEAN organization of production networks and global supply chains.
  • To be sure, Trump’s unilateral imposition of tariffs across the U.S. geoeconomic chessboard poses a critical test for ASEAN. The grouping of Southeast Asian member states has weathered many geopolitical and geoeconomic storms in its 58-year existence, but there has been no adversity like the Trump tariffs. Unless ASEAN can reorganize and regroup, the 10-member body risks further division, diminution and irrelevance.

Significance

  • What the Trump tariffs will likely end up doing is force ASEAN economies to compete aggressively with each other more than ever. Already, ASEAN economies are export-dependent with similar structures of production and available resources. For instance, Malaysia, Thailand and Vietnam make electronics and electrical products, machinery and machine components and integrated circuits and computers for sale in the United States. Both Thailand and Vietnam export rice, while Malaysia and Thailand sell rubber and petrochemicals in third markets.
  • Because intra-ASEAN trade has remained fairly constant at around 22 percent, the major Southeast Asian economies have been forced to rely on world markets for their growth and development. Unsurprisingly, exports in 2023 as a percentage of GDP accounted for 65 percent for Thailand, 68 percent for Malaysia, 87 percent for Vietnam and 174 percent for highly trade-dependent Singapore. For Indonesia and the Philippines, the equivalent figures are 21 percent and 26 percent, respectively, indicating that these two economies can count more on consumption, investment and government spending as a share of economic growth.

Implications

  • With Trump recently completing his first 100 days since taking office, the 90-day pause on his tariffs war from April 9 is designed to let all economies (including the United States) catch their breath and come to the negotiating table to make varying concessions. ASEAN, this year chaired by Malaysian Prime Minister Anwar Ibrahim, reacted with disbelief and indignation at the Trump tariffs but took a decidedly tame stance by vowing not to retaliate.
  • The Trump tariffs are particularly aimed at preventing Chinese transshipments and reexports through Southeast Asia, particularly Thailand and Vietnam. The only effective way for ASEAN to find outlets and ways ahead in the longer term is to focus inward, reboot its “ASEAN economic community” and double down on intraregional trade and investment, such as the Regional Comprehensive Economic Partnership. Business planners may be seeing the end of ASEAN as we have known it, as the neighborhood reverts back to being a region more than an organization.

If you have any comments or questions, please contact BGA Senior Adviser Dr. Thitinan Pongsudhirak at thitinan@bowergroupasia.com.

Best regards,

BGA Indo-Pacific Team

A small ginko leaf

Senior Advisor

Thitinan is a renowned scholar, journalist and expert in international relations and domestic politics across Asia. He has spent more than three decades analyzing and advising on Thailand and the region’s political economy, geopolitics and policy. He helps BGA and clients understand in-depth the global, regional and domestic issues that affect business.  Thitinan is a professor of international relations and international political economy at Bangkok-based Chulalongkorn University’s Faculty of Political Science and a senior fellow at its Institute of Security and International Studies. He has lectured widely at local and international universities, military colleges and international organizations on political and ... Read More