The economic fortune of Southeast Asia has changed completely. This shift comes on the heels of the United States’ imposition of tariffs under the administration of President Donald Trump. Every country in the region seems to be imposing new trade barriers. Thailand, Cambodia, and Vietnam are among the countries reeling the most from the region’s impact. On balance, the tariffs disproportionately affect imports. Worse still, they threaten to derail these nations’ economic ambitions and put millions of good-paying jobs at risk.
The Thai government has been looking for ways to increase economic growth despite all these difficulties. Officials understand that the newly set tariffs are an economic impact Thailand will not be able to take lying down. From manufacturing to retail to the service industry – businesses of all shapes and sizes share this increasing pressure. They’re positioning themselves for collapsing demand for imports, fueled by skyrocketing prices for American families.
It’s a similarly dire situation just across the border in Cambodia. The Hun family has maintained a suffocating stranglehold on the country’s power structure for nearly four decades. Now, they are under pressure to satisfy competing groups by providing them with economic advantages. This “political dance” maneuvering may be the most important thing. The garment sector is the backbone of Cambodia’s economy, providing vital earnings to poor households across this fragile nation. Exports to the United States represent approximately one quarter of Cambodia’s GDP. The implementation of tariffs is a dangerous precedent that stands as one of the most harmful assaults against this essential business sector.
Cambodia’s garment sector is the country’s largest industry and employs over 750,000 Cambodians. Yet today, the industry is reeling from drastic repercussions, with US tariffs possibly climbing as high as 49%. According to industry experts thousands of jobs would be lost in the garment sector alone. It will indeed result in greater levels of poverty and social dislocation and unrest. The economic repercussions reach past individual workers’ lives, weighing heavily on the stability of the Cambodian economy as a whole and its political foundation.
Vietnam too is in an extremely awkward situation. The Communist Party’s legitimacy relies on its ability to deliver strong economic miracles. Combined with the threat of US tariffs, the outlook for growth has started looking bleak. Exports to the US represent a healthy 23% of Vietnam’s GDP. Accordingly, these tariffs are one of the most serious roadblocks that could derail the nation’s economic course.
Vietnam has recently offered to zero out all its tariffs on US imports. This procedural move is intended to curtail the damage and shield its economic underbelly. Their aim with this decision is to promote more balanced and fairer trade. It tries to negotiate an exemption from the tariffs that the Trump administration set on imports. Though it appears likely to produce good outcomes, it is unclear whether it will do so as negotiations continue.
In addition to Cambodia and Vietnam, US tariffs are harming workers. Myanmar, in many ways the most challenged nation in the region, suffers from tariff rates averaging 44%, the highest in all of Southeast Asia. Such exorbitant rates only compound Myanmar’s already difficult trade environment as it emerges from the Shadow Economy.
Overall, Southeast Asia has been most impacted by US tariffs, especially beyond China. Our neighbors, Thailand, Cambodia, and Vietnam, are at an inflection point. Yet they have to respond on the fly to a rapidly deteriorating trade landscape. The stakes are nothing less than the future of our democracy. If these countries are unable to overcome and prosper despite these challenges, they stand to forfeit their economic potential.