Donald Trump’s tariff policies could reshape the economic landscape for Asia, including India, potentially triggering a trade war that would destabilize markets globally. As the world’s growth engine, Asia stands to be significantly impacted.
Trump, fresh from a decisive election win, has committed to imposing a 60% tariff on all Chinese goods entering the United States, aiming to correct the trade imbalance. Analysts are sceptical about whether Trump will maintain such high tariffs and debate their potential impact on China’s economy, estimating a GDP reduction of up to 1.6%.
The ripple effects of these tariffs would extend through Southeast Asia, tightly linked to China through production chains and significant Beijing investments. Adam Ahmad Samdin of Oxford Economics, “Reduced U.S. demand for Chinese goods, resulting from increased tariffs, would lead to decreased demand for ASEAN exports, even without direct U.S. tariffs on these economies.”
Countries like Indonesia are particularly vulnerable due to their strong nickel and mineral exports. Meanwhile, China remains a top trading partner for Japan, Taiwan, and South Korea.
Moreover, Trump has threatened to raise duties by 10 to 20% on all imports as part of his protectionist agenda, claiming other countries exploit the U.S. The impact of these tariffs would vary, with countries like Cambodia, Vietnam, Thailand, and the Philippines, which have significant export shares to the U.S., facing substantial consequences.
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Speculations also suggest that Trump might target countries like Vietnam and India with protectionist measures. Vietnam, for its role in rerouting Chinese electronics to avoid U.S. taxes since 2018, and India, due to the high percentage of Chinese components in its exports, could face higher U.S. tariffs on sectors such as automobiles, textiles, pharmaceuticals, and wines, potentially diminishing their competitiveness in the U.S. market.
The negative effects of a trade war are concerning for India. Ajay Sahai of the Federation of Indian Export Organisations warns of the dangers of Trump’s transactional approach, which could lead to targeted higher tariffs on Indian exports to leverage lower U.S. tariffs in India.
In response, countries might accelerate the “China+1” strategy to diversify production outside China. This shift has benefited countries like Vietnam, attracting investments from major manufacturers like Foxconn, Pegatron, and Samsung, boosting its position as a major smartphone exporter.
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However, as the IMF’s Thomas Helbling outlined, any reorganization of supply chains could lead to efficiency losses and increased production costs, negatively impacting global growth.
While Asian countries might initially gain export market share, their overall economic conditions could deteriorate in a weakening global demand scenario.
