The recent imposition of tariffs by the Trump administration has sent shockwaves through Southeast Asia's economies, particularly affecting nations like Vietnam and Cambodia, which rely heavily on exports to the US. With tariffs soaring as high as 49%, these countries are now faced with the daunting task of navigating a reduced economic forecast stemming from the punitive measures.
As regions around the world adapt to these sweeping tariffs imposed by the US, Southeast Asia finds itself impacted disproportionately. Officially, Vietnam and Cambodia face some of the highest tariffs, alongside Thailand, Indonesia, Malaysia, the Philippines, and Singapore, causing critical disruptions in their export-oriented economies. The economic prosperity these nations enjoyed over the past three decades, largely attributed to robust global trade, is under significant threat.
Vietnam, as a prime example, depends on US exports for approximately 23% of its GDP, a situation mirrored in Cambodia where 67% of the economy is fueled by sales to the US. The economic framework built on exporting goods to the US is jeopardized as these tariffs instigate a ripple effect of instability and uncertainty regarding future growth.
In light of these challenges, Vietnamese leadership, under Secretary-General To Lam, is seeking to forge stronger ties with both China and the US, employing a strategy termed "bamboo diplomacy." However, achieving an ambitious goal of an upper-income, tech-based economy by 2045 now seems even more distant, with growth expectations previously set at 8% becoming increasingly difficult to realize.
While Thailand's dependence on US exports is less pronounced, with under 10% of its GDP, its economy has been faltering, making the new tariffs an additional obstacle. Conversely, Cambodia's political landscape could be most acutely affected, as the stringent tariffs threaten employment and social stability within its garment sector—the backbone of its economy.
In response to the increased tariffs, leaders in these countries are calling for negotiations and seeking to appeal to the US administration for relief. Vietnam has proposed eliminating tariffs on US imports, while other countries like Thailand and Malaysia are also considering similar moves to reduce tariffs in hopes of rekindling trade.
Yet, against the backdrop of an uncompromising US stance on trade, economists express skepticism about whether these diplomatic overtures will resonate. The confluence of growing trade disputes and authority figures in Southeast Asia who once sought close ties with Trump now find themselves at his mercy, their economies vulnerable and dependent on the whims of policy changes from Washington.
As the region braces itself for the cascading effects of these tariffs, it serves as a reminder of the interconnected nature of global economies and the precarious balance these countries must maintain in the face of geopolitical tensions.
