ASEAN hit hard by Trump's tariffs

The US has imposed higher than expected reciprocal tariffs on Vietnam (46 per cent), Thailand (36 per cent), Indonesia (32 per cent) and Malaysia (24 per cent). The Philippines (17 per cent) and Singapore (10 per cent) will face relatively lower tariffs.

Maybank Investment Bank trims its ASEAN-6 GDP growth forecasts to 4.2 per cent in 2025 (from 4.7 per cent) and 4.2 per cent in 2026 (from 4.7 per cent). Export and investment growth will likely be lower than previously projected.

The GDP growth downgrades are larger for Vietnam (-1 per cent point), Malaysia (-0.6 per cent point) and Singapore (-0.5 per cent point), given their heavier reliance on trade and the higher reciprocal tariffs on Vietnam. The GDP downgrades are more modest for Thailand (-0.3 per cent point), Indonesia (-0.3 per cent point), and the Philippines (-0.2 per cent point).

Risks remain to the downside if the global trade war broadens and intensifies, as some countries (EU, China) are planning retaliatory tariffs. The US has not finalised a decision on a potential 25 per cent tariff on semiconductors, which could impact Malaysia and Singapore, and on pharmaceuticals, which could impact Singapore. Critical minerals, energy, and energy products are exempted from the reciprocal tariffs. The reciprocal tariffs will not be stacked on previously announced 25 per cent tariffs on autos, steel, and aluminium.

The China+1 story is not dead, but the reciprocal tariffs will likely disrupt and slow the reconfiguration of supply chains to ASEAN. The ASEAN-China tariff gap remains wide but has narrowed with the reciprocal tariffs, especially for Vietnam and Thailand. China will face an effective US tariff rate of 66 per cent, by Maybank's estimates, with the reciprocal tariff rate (34 per cent) added to the recent additional tariffs (20 per cent) and tariffs under Trump's trade war 1.0 (12 per cent). Multinational corporates may pause on fresh foreign direct investment given the uncertainty over trade policies, broader trade war and excess capacity displaced by the US tariff wall.

MayBank has also trimmed its inflation forecasts for ASEAN-6 to 2.1 per cent in 2025 (from 2.4 per cent) and 2.1 per cent in 2026 (from 2.5 per cent). Slowing global growth and the displacement of excess capacity, particularly from China, will likely dampen price pressures in ASEAN.

US Federal Reserve is expected to cut its policy rate by 50bps in 2025, as the tariffs and other US measures will likely hurt growth and unemployment, outweighing the risks from near-term inflation pressures. The Fed rate cuts and lower ASEAN inflation will open the door for more ASEAN central banks to ease, including Indonesia (-50bps), Philippines (-50bps), Thailand (-50bps), Vietnam (-25bps), and Singapore in 2025.

Trump tariffs hammer global stocks, dollar and oil Stock markets and the dollar tumbled Thursday after President Donald Trump's latest worldwide tariff salvo fanned a trade war that many fear will spark recession and ramp up inflation.

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