ASEAN, explained.
A stock trader monitors the Jakarta Composite Index (JCI) in South Tangerang, Banten, on 8 April 2025 (Bay Ismoyo/AFP via Getty Images)
The US is driving away friends and accelerating a process of diversification.
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A tariffying shift for the ASEAN marketA tariffying shift for the ASEAN market
For decades, the tiger economies of the ASEAN region have flourished under an export-led growth model, anchored by strong trade relationships with major economies, including the United States and China. In 2023 alone, the United States and China respectively accounted for 16% and 15% of total ASEAN merchandise exports. Given this significant trade dependence, it is unsurprising that the region is now expressing serious concerns over the potential economic fallout from the new US tariff policy.
ASEAN comprises a diverse mix of economies, from more advanced markets like Singapore and Malaysia, to developing nations such as Cambodia, Myanmar, and Laos. Aspirational middle powers like Vietnam, Thailand, and Indonesia are positioned in between. All ASEAN members are expected to be negatively affected by the new US tariffs, albeit to varying degrees.
Singapore faces a relatively mild impact, with a tariff rate of around 10%, while Vietnam and Cambodia are among the most heavily hit, facing tariffs exceeding 40%. Notably, even Vietnam’s pre-emptive tariff reduction on US imports has not shielded it from high tariff rates since the oversimplified calculation of the US tariff formula, which takes trade deficits relative to imports and fails to account for actual trade policy, non-tariff barriers, or bilateral engagement.
ASEAN must navigate the dual impact of Trump’s tariff policy.
First, the tariff induces a direct economic effect in disrupting trade flows, raising export costs, and pressuring countries to strike deals favourable to the United States, which may include lowering business barriers and increasing imports of American goods. Vietnam and Japan have taken such steps, although Japan’s attempt failed to lower the recently announced tariff, as well as the 25% tariff on steel and autos that took effect on 3 April.
Second, the tariff causes an indirect political impact, designed strategically to limit China’s ability to reroute exports through ASEAN, a practice the Trump administration has accused Vietnam of enabling.
If the US wants to maintain its global economic and political leadership, it must move beyond a one-size-fits-all tariff strategy.
The challenge for ASEAN is to turn this disruption into an opportunity to balance its economic interests and geopolitical considerations. To address this dual impact, ASEAN countries must find an alternative strategy for expanding their market share.
While other Asian regions are actively scrambling to negotiate with the United States to secure tariff reductions, for ASEAN, the new US tariff regime is likely to accelerate its ongoing trade and export diversification strategy. Cambodia, Vietnam, and Thailand are particularly exposed, given their high export reliance on the US market. In 2023, exports to the US accounted for 42% of Cambodia’s, 27% of Vietnam’s, and 17% of Thailand’s total merchandise exports. With the tariffs now raising the cost of accessing the US market, these economies and the broader ASEAN bloc will be further compelled to pursue alternative export destinations.
ASEAN has already laid important groundwork in this direction. In 2024, several ASEAN member states, including Malaysia and Thailand, secured observer status in BRICS. At the same time, ASEAN countries such as Singapore, Malaysia, and Indonesia have recently signed or are in the process of negotiating new trade agreements with the European Union, and the bloc as a whole has expanded economic cooperation with the Gulf Cooperation Council (GCC). Collectively, these developments position ASEAN to respond to the US tariffs not by retreating inward but by stronger engagement with non-US markets. While the United States remains one of the largest importers of ASEAN goods, a broader diversification strategy would gradually reduce US influence in the region, both economically and politically.
While the blanket tariffs aim to encourage reshoring to the United States, it remains unclear whether American industries have the capacity to absorb the resulting production shift, particularly in low-cost manufacturing sectors such as garments from Cambodia or downstream manufacturing goods from Vietnam and Malaysia. With domestic labour shortages and high operating costs, the US risks creating a lose-lose scenario in which it fails to absorb the displaced production while simultaneously raising domestic prices and facing geopolitical fallout.
This geopolitical alienation could come at a high cost. In its effort to counter China’s growing influence in the Asia-Pacific, the United States needs the support of regional partners. Yet, the indiscriminate application of tariffs risks pushing even longstanding allies away, undermining trust and weakening American influence in a region central to the US-China strategic balance.
If the US wants to maintain its global economic and political leadership, it must move beyond a one-size-fits-all tariff strategy. A more rational, partnership-based trade approach, with preferential terms for core allies and trusted partners, would better serve both US interests and ASEAN’s role in a rapidly shifting global trade landscape.
About the authors
Niaz Asadullah
Dr Niaz Asadullah is a Visiting Professor of Economics, University of Reading, UK, Adjunct Professor, College of Population Studies, Chulalongkorn University, Thailand, the Southeast Asia Lead of the Global Labour Organisation (GLO) and a Senior Fellow at IDEAS Malaysia.
Doris Liew
Doris Liew is an economist at IDEAS Malaysia, specialising in ASEAN’s economic development, regional and international trade dynamics, labour economics, poverty and inequality, and public finance.
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