Kuala Lumpur: Wide-ranging unilateral tariffs imposed by the US administration under President Donald Trump are anticipated to create short-term challenges for several sectors within the export-oriented economies of the Association of Southeast Asian Nations (ASEAN). However, experts suggest that over time, the resilience of these nations will mitigate the impact of these tariffs.
According to BERNAMA News Agency, analysts have pointed out that an immediate consequence of the tariffs is a rise in prices, which subsequently leads to decreased demand for many goods and a decline in exports from Asian economies. Yeah Kim Leng, a professor of economics at Sunway University in Malaysia, explained in an interview with Xinhua that the tariffs result in heightened policy uncertainty, which causes risk aversion and a loss of investor and consumer confidence. This, in turn, leads to reduced business and consumer spending and an eventual economic contraction in the global economy.
Professor Roy Anthony Rogers, deputy executive director at the Asia-Europe Institute of Universiti Malaya, highlighted that the tariffs will inevitably lead to short-term supply chain and trade disruptions. He noted that in a global economy, such actions trigger a domino effect due to supply chain dependencies and capital flow linkages.
Key Sectors at Risk
Yeah emphasized that ASEAN economies, reliant on export-dependent industries with substantial capital investments and high gearing, are particularly susceptible to a “tariff war-financial risk” blow-out. Sectors like the semiconductor and high-tech industries, including data centers, are vulnerable to US sanctions on exports of advanced chips. High-end advanced electronics and their supply chains also face risks from Trump’s reshoring pressures. Yeah pointed out that Malaysia’s solar photovoltaic sector is already feeling the impact.
ASEAN Moves to Respond
Roy Anthony noted that ASEAN states are mobilizing to address the economic threats posed by the tariffs. He suggested that Malaysia, as ASEAN’s chair, should convene a special summit for heads of state, trade ministers, and finance ministers to negotiate with the Trump administration as a unified bloc to maximize their influence. He also proposed reviving the East Asia Economic Caucus (EAEC 2.0) to enhance intra-regional trade and reduce dependency on the US market, including Australia and New Zealand to demonstrate that EAEC 2.0 is not anti-Western but a move to strengthen resilience.
Roy Anthony added that Southeast Asian states are seeking alternative markets, especially for industries closely linked with the US, like semiconductors and technology exports.
US to Be Ultimate Loser
Despite the immediate challenges, the tariffs are expected to undermine the US’s economic position in the long term. ASEAN countries, along with others worldwide, are moving to de-risk, de-dollarize, and build insulation against US-induced economic disruptions, which will not favor the US.
Yeah noted increased financial market volatility, with US stock and bond markets experiencing significant losses due to the anticipated negative tariff impact on the US and global economy, higher inflation, and a shift away from US dollar assets. Without de-escalation of tariff conflicts, the US could become the “ground zero” for a regional financial crisis, potentially affecting highly indebted countries vulnerable to capital flight.
However, Yeah argued that a repeat of the 1997-98 Asian Financial Crisis is unlikely, owing to the region’s reduced reliance on foreign borrowings, stronger fiscal resilience, and increased trade and investment linkages with China, which could partially shield individual countries from US economic shocks.
Roy Anthony warned that if the tariff war continues, it could lead to a global economic recession and potentially escalate to war, akin to the situation in the 1930s.