WASHINGTON DC: Southeast Asia is already bracing for a wave of tariffs. Donald Trump's return to the White House brings a significant shift in US trade policy, with his proposed sweeping tariffs threatening to trigger retaliation and raising the prospect of a global trade war.

For a region whose exports to the US surged to US$143 billion in the first half of 2024 – overtaking shipments to China – Southeast Asia will likely come under increased scrutiny.

At the heart of Trump's agenda is rebalancing trade through robust tariff increases, which he views as both a powerful negotiating tool and a means to rejuvenate American manufacturing. On Tuesday (Nov 19), Trump announced China hawk Howard Lutnick as his pick for commerce secretary, tasking him with leading the administration's trade and tariff strategy.

On the campaign trail, Trump said he would impose tariffs of up to 20 per cent on all imports and a staggering 60 per cent or more on Chinese goods – which would effectively shut many Chinese exports out of the US market.

Southeast Asian economies such as Vietnam, Thailand and Malaysia export more to the US than they import, creating significant trade surpluses. Tariffs would raise the cost of their exports making them less attractive to American buyers. To maintain access to the critical US market, they may need to increase imports of American goods and curtail exports.

ASEAN economies could face short-term disruptions, with economists projecting that Trump's tariffs could cut regional growth by up to 0.5 percentage points in 2025.

CHINA'S OVERCAPACITY - ASEAN'S NEW PROBLEM?

But Chinese exports that are shut out of the US market need to go somewhere else. While this might be good news for consumers in the short term, Southeast Asian manufacturers are already struggling with Chinese industrial overcapacity.

Thailand, for example, has seen over 2,000 factory closures this year due to a flood of cheap Chinese steel and other goods. Indonesia's textile sector has lost tens of thousands of jobs in just six months, and local manufacturers across the region are struggling to stay competitive.

If tariffs cut off access to American buyers, this challenge could deepen as subsidised Chinese imports flood Southeast Asia and other emerging markets.

ASEAN governments are already taking steps to curb the influx. Vietnam and Indonesia have imposed a range of anti-dumping tariffs on Chinese goods, and Thailand recently announced measures to monitor cheap imports.