ASEAN’s safe haven status under Trump 2.0
Economies in Southeast Asia are not directly benefiting from the rapidly escalating tariff war between the US and China under American President Donald Trump. If anything, the negative spillover effects generated by the trade scuffle has turned for the worse.
Taking a cursory glance, one can say that Trump’s renewed policy of imposing higher export duties on all its trading partners has spared no one in the region – thus the lost “safe haven” appeal for ASEAN. A key difference between Trump’s first and second stint in the White House is how he has resorted to a more US-centric trade policy from the get-go, even at the cost of high commodity prices and deflating market sentiment onshore.
As Graph 1 shows, the decline in share prices was steeper this time around, with the initial hit more pronounced for Vietnam, Singapore, and Malaysia – countries that were spared from Trump’s tariff crosshairs during his first stint in the White House. The sharp drop in major stock market indices is proportional to the heft of additional duties imposed on US-bound goods: for example, the 6.2 per cent month-on-month decline of the average performance of the Vietnam Index in April was in response to a 46 per cent tariff. This compares to a soft 1 per cent slide in January 2018 when Trump waged his first global trade war. Thailand, which was handed a 36 per cent duty, saw stocks crash by 12.5 per cent from a year ago.
These declines represent some USD 160 billion in market capitalization erased across Southeast Asia, with valuations not fully recovered even after Trump hit a 90-day pause for his outsized “Liberation Day” tariffs.
Little benefit from decoupling
Washington’s renewed tariff war targeted even small, developing economies which have been long-standing suppliers of food items and other goods. Thus, there has been little to gain from manufacturers decoupling from China – after all, firms that wanted to move their factories out of the Mainland at the first sign of trouble had already done so during or after Trump’s first term, and those who now consider it will need months, maybe years, to complete the transfer.
With tariffs imposed on virtually every country, manufacturing firms based in the region are better off staying to observe if Trump’s mega tariffs materialize, or if negotiations will bring the rates lower. Until then, market jitters will persist, which has already manifested in softer, although still, positive data on manufacturing operations. Graph 2 shows the drop in the Manufacturing Purchasing Managers’ Index (PMI) for March 2025, although still above the neutral 50 level, which implies that factories within ASEAN remain on expansion mode.
ASEAN’s PMI saw a steep drop between March to April 2025 while the US stayed firmly within contraction territory. Meanwhile, Japan is hurt by deeper production declines so far this year. China’s two-month rise in PMI figure is buoyed by an increase in new orders even in the wake of the sky-high US tariffs, and April’s decline saw manufacturers staying on expansion mode. It is worth noting that this follows several months of a lull as domestic demand had slumped in 2024.
Domestic concerns in focus
Appetite towards Southeast Asia also depend on idiosyncrasies of each economy. Conditions specific to a country affect market perception, and this is the case for Thailand and Indonesia.
The main board of the Stock Exchange of Thailand plunged by 16 per cent year-on-year, the worst showing in the region, as players grapple with weak domestic economic activity on top of a 36 per cent additional duty on US-bound exports. Meanwhile, the Jakarta Stock Exchange composite index slipped by 9.8 per cent in April compared to a year ago. The response to the US’ 32 per cent duty is actually softer than the market backlash over new President Prabowo Subianto’s public spending priorities and concerns over Indonesia’s fiscal discipline, which triggered a circuit breaker during midday trading of 18 March.
At the same time, Vietnam stocks are only down 1 per cent from 2024 as market appetite remains upbeat after the economy grew by 7.09 per cent last year. Strong consumer demand is buoying corporate profits higher, including appetite for new initial public offerings. Singapore, the region’s financial standout, saw its composite share index up 15 per cent year-on-year, with stable corporate performance helping soothe global market uncertainty.
Taking advantage
Investors monitor internal and global trade concerns even more closely at a time of immense market volatility. ASEAN member-states can best take advantage of the worsening tariff war by bolstering intra-region trade as they set their fiscal and political houses in order.
The region’s growth potential will continue to outstrip that of mature economies. Investors can wade through the tariff noise and reveal pockets of opportunity within. Companies catering to regional demand, including those refocusing their US shipments to alternative markets, will deliver good returns for shareholders.
The ASEAN boasts of a 670 million consumer market with a predominately young demographic segment holding rising incomes, and this suggests that consumption will remain robust for years to come. This has been our view over the past decade, and we stay upbeat towards investments in this part of the world. ASEAN may not be marked safe from bloated US tariffs, but there are more reasons to stay bullish about the region’s growth potential while other economies are under pressure.
