Southeast Asia searches for a U.S. trade deal, but the damage from Trump’s tariffs is already done
Southeast Asia has gained some of the worst in the “Liberation Day” tariffs of President Donald Trump, with steep duties imposed on countries such as Vietnam, Malaysia and Thailand. Leaders across the region frantically trying to get organized in the White House to see if they can get a reprieve.
But regardless of how those negotiations went, the damage could have been done. Governments throughout Southeast Asia are fatigue of growth expectations because global uncertainty threatens the region's economic export.
“Increasing uncertainty is leading businesses to prevent investment and other business-related decisions such as rent,” said Sheana Yue, an economist from consulting Oxford's economics. Headwinds in the labor market will also hurt private consumption, he added.
Malaysia is the latest country in Southeast Asia to warn of slower growth this year. On Monday, Prime Minister Anwar Ibrahim Says The country is unlikely to hit its growth forecast of 4.5% to 5.5% this year, even though he has declared some optimism that can reduce US tariffs.
Anwar added That a revised GDP forecasting will come “when there is more clarity and we see the outcome of future negotiations.”
Neighborhood Singapore reduced Its growth forecast last month, is now an assessment between 0% and 2% growth for 2025, down from an initial projection of between 1% and 3%.
“The growth of economic growth in our region will negatively affect the fall in external demand due to part of the greater impact of tariffs on global trade and growth,” Singapore's Ministry of Trade and Industry said in a statement. It added that consumer's dampened business and sentiment will also affect domestic consumption and investment for many economies.
Then, last week, the Thai Ministry of Finance Cutuk Its growth forecast to 2.1%, down from 3%. Tariffs blame us and how they can slow down the global economy.
Thailand's projection can be cited even further. The new 2.1% projection depends on whether Bangkok can regulate the threat of Trump's 36% tariff in the country in Southeast Asia.
The US is the largest Thai export market, and the second largest largest export market of Malaysia and Singapore.
Vietnam, in contrast, maintains a bullish 8% target growth for 2025, despite facing a 46% tariff from the Trump administration. On Monday, Prime Minister Pham Minh Chinh once again said that the country would maintain its target growth. US exports are approximately 30% of the country's GDP.
Trump's 90-day pause in his reward tariffs was running on July 8. Southeast Asian governments are currently talking to Washington, offering to cut their own import taxes on US goods or offer to buy more US products. Despite the positive messaging from both Trump and his officers the deals will come, there is still no public announcement of an agreement, or even the framework of an agreement.
“The fact that showing improper policy -making came at the beginning of Trump's four -year term is to keep businesses and households carefully,” Yue said.
The economist suggests that the best possible outcome for Southeast Asia is a 10% tariff blanket in their US exports. This will allow the region to benefit from the ongoing supply chain away from China, which is still facing a 145% tariff rate on its exports.
But Yue warns that economies in Southeast Asia can still finish Trump's full rates without reaching. That can transfer production to countries with lower US tariff rates, which can lead to a capital flow as manufacturing goes elsewhere.
This story was originally featured on Fortune.com
