Are Us Tariffs An Opportunity For Asia To Emerge Stronger

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For decades, the global supply chain and markets have been considered an enterprise utopia, until the US trade tariffs imposed earlier this year forced a reckoning on many countries of the world.
There are cracks in a system reliant on an ever-expanding global production and consumption model, and as the labour nucleus of the world, Asia has been hit heavily.
Several Asian countries with large exports to the US have been hit with high tariffs: 20 percent on Vietnam, Sri Lanka, and Bangladesh; 19 percent on Cambodia and Pakistan; 15 percent on Japan and South Korea, among others.
India currently faces the highest tariff rate at 50 percent, with a 25 percent punitive element for its oil trade with Russia.
John Beirne, principal economist with the Asian Development Bank (ADB), said that these tariffs have been the highest, even when compared to the Great Depression of the 1930s.
“This uncertainty around trade policy poses significant challenges to external demand and investment in Asia,” he said.
Lower growth projection
ADB lowered its growth forecast for Asia in its Outlook report published in July from 4.9 percent to 4.7 percent in 2025, and 4.7 percent to 4.6 percent in 2026.
The institution noted: “The downgrades are driven by expectations of reduced exports amid higher US tariffs and global trade uncertainty, as well as weaker domestic demand.”
The other risks include the conflicts and geopolitical tensions in the region that could potentially disrupt the global supply chain.
Despite these threats, Beirne believes that the intra-regional supply chains within Asia will only be strengthened by this challenge.
This belief in the regional reliance of Asia is echoed by Ajay Srivastava, founder of Global Trade Research Initiative, a New Delhi-based think tank.
Most industrial goods are produced in China and some other Asean countries or India, on a smaller scale. Asian countries are many times more self-reliant than Western countries, which depend on Asia for sourcing goods and services, added Srivastava, a former trade negotiator for the Indian Commerce Ministry.
For instance, India, which exported over US$87 billion (RM363 billion) worth of goods to the US in 2024, may have been hit with the highest tariff in Asia, but experts believe that the nation could absorb the shock after some upheaval, especially if US-India trade talks lead to a lowering of tariffs.
The country’s growing domestic demand, supported by tax reforms, could potentially offset some gaps left by the reduced US exports.
“While India’s middle class is expanding rapidly, fragmented logistics, limited access to finance, and policy-driven import restrictions constrain the ability of producers to scale and compete.
“These constraints reduce the capacity of even large economies to absorb external shocks through domestic demand,” said a recent United Nations Development Programme (UNDP) report on the shifting trade landscape in Asian states.
Export-centric economies affected
Noting similar challenges for China, the report stated that digital platform-driven domestic demand restricts broader participation because of market concentration, regulatory constraints, and the urban-rural divide.
Export-centric economies such as Cambodia and Vietnam are much more vulnerable. In 2024, exports to the US constituted 29 percent of Cambodia’s gross domestic product (GDP) and 30 percent of Vietnam’s.
As per the UNDP report, Cambodia could lose more than half of its exports to the US, translating into a contraction of over one-third of its total export sector. Vietnam could face a one-quarter drop in US-bound exports.
Thailand, Malaysia, and Sri Lanka are also vulnerable to their respective tariffs. The Asia-Pacific region faces an overall 6.4 percent decline in total exports to the US, with Southeast Asia hit the hardest at 9.7 percent.
Intra-regional supply chains and regional trade in Asia have been growing steadily, but with each country dealing with its domestic impact, none can solely rely on the other in the immediate future.
However, experts say that in the long term these intra-regional supply chains could “strengthen Asean’s resilience to external shocks”.
Who is impacted the most?
The reciprocal tariffs are likely to disproportionately impact export-heavy industries such as textiles, jewellery, and carpets.
Any impact on the output will directly affect the workers. In Asia, workers in such sectors are largely informally employed, with no access to health or pension benefits.
Workers in Karnataka, a southern state in India, are already anticipating layoffs as orders are being lost. The state employs over half a million garment workers. Textiles and apparel are the two sectors in India with a dominant female workforce.
The threat of job loss is costing workers their limited negotiating power in an overexploited sector.
“Even when the situation was good, these workers were only being paid the minimum wage of INR 10,000 rupees (RM470) per month, and we have been fighting for more.
“Now with these tariffs, we won’t have that voice also,” said Garment and Textile Workers' Union (Gatwu) president Pratibha R.
“Whatever has happened at the international level will only affect poor workers, poor female workers,” she added.
In Cambodia, vulnerable export regions such as Phnom Penh, Kampong Speu, and Svay Rieng are also home to many low-income and female workers in export-linked industries.
In Vietnam, migrant and female workers form the majority of the labour force in provinces such as Bac Ninh and Ho Chi Minh City, according to the UNDP report.
By distributing the burden of tariffs between workers, consumers, and the profit margin, larger corporations may be able to absorb such a shock to the global supply chain.
However, it’s the small manufacturers, importers, and exporters who will be most affected.
“A giant like Walmart or Costco or some of these big buyers will continue to have a larger capacity to negotiate better prices to absorb the tariffs and so on, while smaller players will not have so much elbow room.
“I think SMEs (small and medium enterprises) all over the world are going to face the impact of the tariffs to a larger extent than larger groups,” said Santosh Pai, partner at Dentons Link Legal with extensive cross-border experience in legal matters across Asia.
Do tariffs benefit US consumers?
While the tariff imposition has shaken up exporters in Asia, the question of the impact on the US consumer market still remains.
Comprising a little over four percent of the world’s population, the country is the third most populous in the world and was responsible for nearly 30 percent of the world’s final consumption expenditure in 2023.
US President Donald Trump vowed to bring inflation down in his run before this second term, but experts said these tariffs are likely to exacerbate the problem.
Raymond Vickery Jr, senior associate with the Chair on India and Emerging Asia Economics, Center for Strategic and International Studies said: “If you’re trying to bring down inflation, you try to get goods at lower prices. And we have seen in the past (the higher prices) passing on to the US consumer.”
Vickery Jr was also the former US assistant secretary of Commerce for Trade Development.
With all the talk about tariffs, US consumers are expected to change their spending habits, a shift that Srivastava feels is necessary.
US President Donald Trump“What has been happening in the name of trade is not normal. The trade deficit of the US meant they’ve simply been buying more, and all of us fell into the trap and jacked up our production capacities.
“That whole consumption pattern is unsustainable with our global population and distribution,” Vickery Jr said.
Although the tariffs are meant to incentivise American manufacturing, it’s unclear how effective they will be, especially in light of the anti-immigration policies.
“The immigration policy has had significant impacts on labour supply in the US. And the shrinking of the labour force will make it difficult to transition toward domestic manufacturing, because it will also have inflationary implications, including wages,” says Beirne.
Moreover, high tariffs on products like steel, which are critical for manufacturing, are actually delaying US manufacturing investments, added Srivastava.
“You’re not going to increase employment in the US by this ‘Fortress America’ approach. In the history of economics, wider markets and trade have promoted prosperity,” said Vickery Jr.
“It’s inconceivable that just concentrating on manufacturing jobs, which admittedly we (US) have not managed as well as we should, is going to help build prosperity. So, this is a completely mistaken policy.”
A turning point for Asia?
The tariffs mark a critical juncture for every Asian country that has been impacted, and it’s up to the individual nations to sail out of these choppy waters.
“What this has done for India is inject a sense of urgency, because the US development came as a bit of a surprise.
“And even with a rollback, as most people are assuming that India and the US will come to a compromise (on the tariff), India definitely realises that it needs to do many other things,” says Pai.
This sense of urgency has defined the last few months in Asia, as countries scrambled to negotiate deals with the US.
Diversification of markets, products, investments, and more is the key to economic resilience, and that is likely to be a priority for all affected Asian economies going forward.
“The true globalisation utopia may not be realised and diversification will now be the primary concern,” said Pai.
“People have been trying to diversify away from Chinese supply chains to reduce their reliance, and now on the demand side, people will not want to rely on America as the single largest consumer market,” he added.
Balancing act
Amidst this turmoil, Asian economies will have to balance short-term solutions with their long-term needs and goals.
“Domestic policies should also try to support enhanced productivity and competitiveness across economies. And this would be a longer-term, structural goal to negate some of the impacts of the tariffs.
“At the moment, we’re in a period of transition as we get used to this new global trade environment. But new trade relationships will have to be developed to make economies even more resilient to external shocks,” said Beirne.
Policy, infrastructure, and logistical issues create significant economic setbacks for a country like India.
“India is simply not efficient for manufacturing, so it needs to do a lot to ease business and so on.
“And secondly, India has been trying to attract manufacturing investment and global supply chains minus Chinese players, and that has acted as an impediment,” Pai opined.
Along with outward adaptation, countries need to build inward infrastructural resilience. The UNDP report suggested the following:
Strengthen domestic engines of growth: Address domestic regulatory and infrastructure gaps and provide targeted support to MSMEs (micro, small, and medium enterprises). An example is Thailand’s tax deductions to accelerate MSME digitalisation.
Expand inclusive social protection: Scale-up social safety nets, especially for the region’s 1.3 billion informal workers. Focus on creating adaptive programmes and stabilising consumption. Indonesia’s BP Jamsostek scheme for gig workers and Cambodia’s IDPoor programme for targeted cash transfers are examples of this.
Build a future-ready workforce: Labour supply side: Equip the workforce for new industries through targeted reskilling and job matching. Strengthen public employment services, as in the case of Singapore’s SkillsFuture initiative for lifelong learning and the Philippines’ Tesda for community-based skills training. Drive employment growth by improving MSME access to finance and digital tools such as Cambodia's digital platform for informal workers and targeted support for youth-led enterprises.
To build stronger nations, Asia will have to prioritise development and sustainability goals within economic targets. And it can only do that by focusing on the growth and health of the people that constitute it. - Mkini
This article was first published in Asian Dispatch. Read the original article here.

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