It’s an exciting time in the global trade landscape and 2025 will bring quite a bit of change, for better or worse, to these new player countries. Economic interdependence is never static. Countries such as Mexico and many Asian countries would be extremely vulnerable because they are very trade dependent. They are reliant on the US. Countries such as Vietnam, Thailand, and Malaysia have reaped the strategic benefits. These benefits can position them to succeed even in the challenging changes underway.
According to the industry publication FreightWaves, the nature of global trade is changing quickly. This acceleration is caused by geopolitical tensions, increased consumer demand, and demand chain challenges. Countries that have historically relied on exports to the United States need to adjust their plans. Tariffs and other trade barriers are hitting harder than ever, and they must respond quickly. These dynamics will largely determine the economic fortunes of emerging markets over the next few years.
Vulnerabilities in Mexico and Asia
Mexico as well as a number of Asian countries are caught in a squeeze play. Many are getting beat up trying to figure out the future global trade slowdown. First, their economic structures are highly open, which frequently results in increased susceptibility to external shocks. The U.S. market’s outsized impact only enhances these challenges. The periodic downturn in the American economy can have an immediate and negative effect across the border in Mexico and with its Asian competitors.
Mexico in particular has become an increasingly important transit point for goods from China and elsewhere into the U.S. market. This “connector” activity has enjoyed an increasing share of products transiting through Mexico as value is added prior to export. Vietnam has quickly become a leader in the region on this front. The country has been using its strategic location and low cost of labor to advance leaps and bounds. Yet, this reliance on this connector model further paints out the danger of trade dependency.
Unsurprisingly, tariffs on Chinese imports are through the roof. They rose from a baseline effective rate of 11% at the start of 2025 to above 35%, ratcheting up the pressure on countries such as Mexico and Vietnam. The Trump administration’s extra tariffs … Continue reading The real story behind the China-U.S. Consequently, both countries are reassessing the contributions they want to make to global supply chains.
Strengths of Southeast Asian Economies
While some countries succumb to these pressures, others are resilient and flourishing. Thailand, Malaysia, and India have taken exceptional strengths to the next level, laying the groundwork for future growth. These countries enjoy robust education systems, quality infrastructure, stable business climates and integration into global trading networks. These characteristics increase their attractiveness for foreign direct investment (FDI). They supercharge their ability to compete in the increasingly competitive global race.
Additionally, these Southeast Asian countries have heavily promoted their low wages, and different tax breaks and incentives to attract the same sort of manufacturing investments. Companies are rethinking their supply chains in response to increasing tariffs on Chinese imports. Consequently, Thailand and Malaysia are beginning to look like very attractive alternatives for those seeking a manufacturing relocation. Their complementary geographic positions make it even easier to reach those key markets, like the United States.
Of these, Vietnam continues to be the furthest ahead thanks to its aggressive playbook to draw in FDI and connect up with worldwide worth chains. The country’s multi-alignment foreign policy allows it to forge beneficial relationships with various global powers while maintaining a competitive edge with low labor costs. Vietnam likely will gain the most from new Chinese FDI and market share gains. It now joins Thailand and Malaysia in fully capitalizing on these favorable circumstances.
The Case of Brazil and Central Europe
Since 2018, Brazil’s exports boom to China has exceeded record levels. Much of that growth is driven by commodities, particularly soybeans, meat, cotton, and oil—almost a repeat of U.S. exports to the Asian behemoth. The country’s ability to diversify its export markets provides a buffer against potential economic downturns resulting from U.S.-China trade tensions. Brazil is playing its hand as an agricultural powerhouse. Consequently, it is poised to maintain a strong market share in China.
Perhaps more difficult are the challenges Central European nations must confront, even with their alluring assets for FDI. In the spotlight Countries in this region have frequently received praise for their adept geopolitical positioning close to the lucrative European single market. They are plagued by over-reliance on the automotive industry, which makes up most of their exports. With Slovakia’s concentrated exports to the U.S. inherently susceptible to tariff-related fallout, the economic security of the country’s promising trajectory could quickly be turned upside down.
As we move south in the continent, Latin American countries, again excluding Mexico, tend to be less open and less reliant on U.S. demand. Yet, they don’t face the additional barrier of high customs duties. This political space is crucial to let these countries deploy their distinctive advantages. Consequently, they are less dramatically affected by external economic shocks.