The writer is senior economist for emerging Asia at Natixis Corporate & Investment Banking
As promised and feared, US President Donald Trump started his second term by deploying tariffs to tackle a wide range of issues from immigration to national security to overreliance on imports for production. The US is the largest importer of goods and services, buying $4.1tn worth in 2024, surpassing Chinese imports of $2.6tn by a wide margin. As such, higher barriers to its trade disrupt global supply chains and investment.
The spectre of tariffs has helped spark a sell-off in bonds on inflation fears, pushing the dollar higher and currencies of Asian emerging markets lower. It has also weighed on some equity markets such as India and Malaysia.
But Trump’s trade barriers are much more targeted than he promised on the campaign trail. The 25 per cent tariffs on aluminium and steel are steep but they are not the biggest items on the list of American goods imports. The pushback of plans for what the US describes as reciprocal tariffs until April also signals less extensive action than had been feared. Moreover, the 10 per cent tariff on China is likewise much less than the 60 per cent threatened. This points to worsening US-China relations on trade and investment, though not yet a complete breakdown.
Instead of fretting over tariffs, investors should look for opportunities in those countries that stand to gain from probable shifts. Emerging market economies in Asia outside China should be on the list.
While China is likely to compete more aggressively for the trade pie outside the US, those countries that want to benefit from disrupted global supply chains should see growth as they did after trade frictions started in Trump’s first turbulent term. Vietnam is the big example. From 2017 to 2023, the country increased its export share to the US in all product categories, making it a winner among Asia’s emerging economies. This growth is not merely a result of China rerouting its exports under the guise of Vietnamese goods but stems from Vietnam’s hard-earned progress.
Vietnam’s trade linkages have expanded significantly across the globe, spanning China, the US, north Asia, the EU and the Asean group of 10 Asian countries. This performance mirrors the rapid increase of foreign direct investment over the past two decades. Vietnam has outperformed the rest of the region in attracting FDI, drawing inflows from countries such as South Korea, Singapore, Japan, Hong Kong, Taiwan, China and the US.
Malaysia and Singapore have benefited from an investment diversification push, too. Malaysia has targeted high-tech sectors such as semiconductor and data centres while Singapore has expanded in financial services and attracted corporate headquarters. The two have also teamed up to create a Johor-Singapore Special Economic Zone this year to boost investment and jobs in strategic sectors. Asean — which includes Vietnam, Malaysia and Singapore — is now the largest recipient of FDI in Asia.
India has also gained in export market share to the US since 2017, but to a much smaller extent. A “Make in India” drive by the Modi government, tax cuts and production incentive schemes have helped, especially in the information technology sector. Still, manufacturing has not kept up with the country’s rapid growth, and its share of GDP declined to 14 per cent in 2024 from 16.5 per cent in 2014.
Prime Minister Narendra Modi is trying to change that with pre-emptive lowering of tariffs on US goods while boosting bilateral India-US trade, investment and security ties. He is targeting further investment in sectors such as toys, footwear and IT.
Modi has done a good job at beefing up India’s infrastructure, from energy to expressways. What is next is reducing red tape, especially burdensome land and labour laws that hold back investment and scaling-up of companies. India’s $110bn trade deficit in goods in 2023 with China, not just in high-tech but in labour-intensive manufactured goods, shows that opportunities lie in both grabbing more of the US trade pie and serving strong domestic demand at home.
For some economies, this shock to global trade is a chance to bolster resilience, liberalise trade access and improve competitiveness. Amid higher trade friction and volatility, capital is seeking an eager host. Some economies in Asia — such as Malaysia, Singapore, Vietnam, and increasingly India — are positioning themselves to be winners in the trade war.