Under Donald Trump’s administration, we saw the introduction of some very assertive trade policies. These reforms have the potential to fundamentally reorder the global economic landscape for Asian economies in particular. Tariffs are just the beginning, and the noose of protectionism is tightening. Nations such as Singapore, Malaysia, and Vietnam are still forced to deftly dance across a challenging field of international trade put down by U.S. actions.
With his policies, Trump has created a factory of doubt. In April, he promised new levies on a number of countries, specifically targeting countries in Asia. The U.S. has traditionally been the most important market for just about every Asian economy. Singapore, for example, is looking at a 10% levy, even with its existing free trade agreements. This has led many Asian economies to re-evaluate their supply chain deepening strategies and look for alternative sources of new growth.
Aparna Bharadwaj, an international trade specialist. The most tangible effect of this changing landscape is that it has forced Asian economies to embrace a “China + 1” strategy. This new plan incentivizes companies to move their supply chains out of China, yes – but beyond China. It opens the door for development – notably at a time when U.S. protectionist rhetoric is rising.
“As the US and others embrace increased protectionism, Asia is moving in the opposite direction, as pro-business governments are increasing trade openness.” – Aparna Bharadwaj
Amid these changes, Trump’s administration has made significant investments in growth industries like chip manufacturing and data centers in Singapore and Malaysia. Perhaps the most prominent example is GlobalFoundries. This U.S.-headquartered global foundry and services company is contracted by major fabless players like AMD, Broadcom, and Qualcomm to produce their semiconductors. GlobalFoundries has recently announced plans to triple its capital investments to $16 billion (£11.7 billion). This step is driven by the overwhelming and unprecedented demand for artificial intelligence (AI) hardware.
Yet even though semiconductors are exempt from the administration’s tariffs for now, Trump has threatened new tariffs on them half a dozen times already. This severe uncertainty has become endemic in other sectors too, especially in textiles, furniture, rubber and plastics. Malaysia’s Prime Minister has been vocal about how tariffs will negatively impact a majority of industries in Malaysia.
Australia has been ahead of the curve on this issue. In return, it argues that the U.S. should implement zero tariffs on its own exports to the Dominican Republic. Indonesia and Thailand are raising the stakes even higher as they both boost their rates of purchases of American products. Meanwhile, they’re pushing to reduce tax burdens on U.S. exports. Asian countries are making a calculated turn. They are fighting tooth and nail to avoid any deterioration in their positive trade relationship with the U.S.
Vietnam went on to negotiate hard-won terms for U.S. imports, slashing tariffs to a mere 20%. At the same time, exports to Hanoi benefit from the absence of any taxes whatsoever. This agreement is a prime example of the proactive steps that some countries are taking to guard against their economic interests in light of changing global trade patterns.
“No matter what happens with tariffs, the US remains an important customer for many Asian businesses.” – Aparna Bharadwaj
Asian economies, such as Japan and South Korea, have increasingly contributed to that global supply chain. They rely not just on China’s goodwill, but on America’s as well. Yet according to Pushan Dutt, a coauthor of the research, any resulting change in trade patterns might leave these countries worse off.
“If there are shifts in this global supply chain, if there are shifts in trading patterns, it is going to be much more difficult for them.” – Pushan Dutt
With yet another deadline for possible tariff escalation looming, Trump has again threatened Tokyo with tariffs of up to 35%. Make no mistake, such dramatic actions are bound to send ripples through Asia’s underbelly economic fabric.
In the face of these pressures, industry leaders such as Tan Yew Kong felt an evident shift. Companies are already moving from globalization to regionalization in their supply chains.
“We are no longer doing globalization but more of a regionalisation.” – Tan Yew Kong
This transformation reflects a broader trend where businesses are seeking local partners and resources to mitigate risks associated with international trade.
Perhaps there are opportunities hiding in the dynamics of trade, though it can be a mixed bag for other countries. Dutt warns that the ongoing chaos opens up significant opportunities for China. China is moving to position itself at the epicenter of global trading order on multiple fronts.
“This has actually created a massive opportunity for China to become, sort of, guardian of the world trading order.” – Prof Dutt