Southeast Asia’s emerging economies have demonstrated impressive resilience in 2024, but could the geopolitical challenges of 2025 amid widespread tariff uncertainty undo much of the region’s hard work?
The impact of Trump’s tariffs, which were far stronger than many nations within the region had anticipated, was particularly severe for Asia’s emerging economies and threatens to undermine the growth of many poorer nations following years of risk aversion.
Despite growing global uncertainty in Q4 2024, Southeast Asian economies remained resilient, with almost all reaching at least five per cent growth in the quarter.
Leading the charge was Vietnam, posting 7.55 per cent growth. Meanwhile, Thailand overcame -5 per cent growth one year ago to rally by 3.2 per cent, representing its third-highest year-on-year quarterly growth rate in the past five years.
Driving this growth were strong investments in the region alongside stable exports, output, and consumption figures. However, regional currencies experienced weakness against the US dollar due to expectations of high-for-longer interest rates in the United States.
The return of Donald Trump to the US presidency has been a confounding factor in the first half of 2025 for Southeast Asia’s emerging economies at a time when stability has been much sought after for the region’s nations.
According to a report by Systematix Research, the announcement of ‘Liberation Day’ tariffs by Donald Trump handed Southeast Asian nations the steepest rise in trade costs, followed by economies in Eastern and Continental Europe as well as the Middle East.
The report concluded that the maximum increase in tariffs has been on emerging economies, “particularly in Asia and Eastern Europe.”
Given that 2024 saw a 40 per cent decline in venture capital investments in Emerging Venture Markets (EVMs) involving Southeast Asia as well as the Middle East and Africa, the timing of Trump’s tariffs has been particularly challenging for the region’s emerging economies.
In what were termed ‘reciprocal tariffs,’ Southeast Asian nations such as Cambodia and Vietnam were hit with 49 per cent and 46 per cent tariffs overnight, before President Trump announced a 90-day delay to the imposition of the levies.
Both nations are key production hubs for apparel and sports goods manufacturers due to their competitive labor costs, and US firms like Nike and Gap have sought to expand their production in these emerging markets in recent years.
Measuring the impact of tariffs
Some of Southeast Asia’s more ambitious economies, like Thailand and Malaysia, have sought to join BRICS as a means of securing greater trade and investment opportunities on a global scale in recent months. Now, as the United States enters a period of extreme protectionism, affected trading partners are rapidly looking for solutions.
In terms of the direct impact of tariffs on Thailand’s economy, the uncertainty of the 90-day postponement has left exporters in a state of flux, and the full impact is likely to become more noticeable in the second half of the year.
Thailand’s export exposure to the United States accounts for 18 per cent of the nation’s total exports and 2.2 per cent of its gross domestic product (GDP). This comprises sectors like electronics, machinery, automotive, electrical appliances, and processed foods.
Additionally, Thai exports will experience further impacts through global supply chain producing for US demand for rubber, automotive parts, metal and steel, and chemical products, which account for around 4.3 per cent of the country’s exports.
The tariff time bomb facing Thailand comes at a time when the emerging economy announced that its March 2025 exports reached a historic high of US$29.5 billion at a year-on-year growth rate of 17.8 per cent, the highest monthly export value ever recorded for the country.
These impressive growth rates have been supplemented by growing international trade and company registration growth in Thailand throughout 2024, but the outcome of Trump’s tariffs will have a deciding role in the nation’s long-term growth.
Growth forecasts from INVX Research have slashed Thailand’s rate for 2025 to 1.4 per cent, down significantly from earlier projections of 2.5 per cent. An estimated three per cent contraction in exports, with the fourth quarter forecasted to see a double-digit decline, is a key factor in the revision.
Signs of resilience in productivity
Last year, World Economic Forum forecasts suggested that trade among the Association of Southeast Asian Nations (ASEAN) will grow by US$1.2 trillion over the next decade. By 2031, the report claims that ASEAN exports have the potential to surge by nearly 90 per cent versus overall global trade growth of less than 30 per cent.
Also Read: US tariffs disrupt global trade, forcing a rethink in Southeast Asia
Although Trump’s tariffs will impact growth rates, it’s clear that emerging Asian economies are becoming a strong hub for supply chain diversification for global manufacturers seeking to explore new markets, build resilience, and manage operating costs.
As a rapidly emerging manufacturing hub, Southeast Asia could yet discover a more self-sufficient model without the same level of reliance on exports to the United States.
With artificial intelligence forming the next frontier of innovation, Southeast Asia’s emerging economies also have a key advantage thanks to the 672 million-strong population throughout the 10 emerging economies in the region. Of these demographics, more than 200 million residents are aged between 15 and 35, and their collective tech fluency could aid Southeast Asia’s strong economic outlook for life in the age of tariffs.
Thriving in uncertainty
Learning to live with higher tariffs is likely to be the key to the short-term future of Southeast Asia’s emerging economies. But indications show that there’s plenty of resilience and momentum generated among the region’s growing nations.
The future may hold a level of self-sufficiency without reliance on exporting to the United States. The potential of building an AI infrastructure can also be a major help in out-innovating trade issues regionally.
Southeast Asia’s emerging economies entered 2025 with impressive momentum, and there’s no reason why the region’s strong growth rate can’t be recaptured following the hit of trade uncertainty with the US.
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