The levies are reshaping supply chains and driving structural shifts, but the full impact is still to come
Decoding Asia newsletter
Lionel Lim , Jamille Tran , Tan Ai Leng , Evan See , Low Youjin & Elisa Valenta
SINGAPORE, JAKARTA, KUALA LUMPUR, HO CHI MINH CITY
Published Wed, Apr 1, 2026
Nguồn: 阅读简体中文版 (beta)
Singapore’s position as a transhipment and logistics hub may come under strain, with stricter rules likely to raise compliance costs and divert trade flows. PHOTO: ST
On Apr 2, 2025, US President Donald Trump imposed a 10 per cent baseline tariff on most imports, alongside additional reciprocal duties tied to trade surpluses, leaving several South-east Asian economies among the hardest hit.
One year on, the region appears to have weathered the tariff shock, supported largely by temporary buffers including the front-loading of shipments, delayed implementation of duties, and sector-specific exemptions.
In an unexpected turn, the “Liberation Day” tariffs were later struck down by the US Supreme Court, which ruled that the president had overstepped his powers.
For businesses across the region, that has offered little relief.
“In terms of the friction that exists in trade, it’s only going to get messier over time,” said Ravi Vijayaraghavan, a partner at Bain & Co’s Singapore office. “I think that’s the reality of the new world that we live in.”
Against a backdrop of rising geopolitical tensions, including the Middle East conflict, Washington has turned to other tools – notably Section 301 investigations targeting alleged unfair trade practices, and Section 232 tariffs imposed on national security grounds – to pursue similar objectives. This has signalled a shift to potentially more unpredictable forms of trade pressure.
Across the region, the past year has also driven more structural shifts with companies moving beyond short-term workarounds to more fundamental adjustments, from renegotiating contracts and absorbing higher costs to redesigning supply chains and diversifying export markets.
For members of the Singapore Manufacturing Federation (SMF), for example, “the biggest shift has been the move from reactive to structural supply chain redesign”, noted its president Lennon Tan.
This, he said, has taken the form of a “Singapore + 1” strategy, with higher-value functions such as research and development anchored in the city-state, while more labour-intensive processes are relocated to lower-cost markets in the region.
A year of shifting US tariffs across Asean
In Vietnam, foreign-invested manufacturers have captured much of the upside from shifting supply chains, while export performance among domestic firms has declined, highlighting structural gaps in competitiveness.
Elsewhere, the impact has been felt more directly.
Callum Chen, chief executive officer of LH Plus, the second-oldest plastic products manufacturer in Malaysia, told The Business Times that sales dropped by about 40 per cent after “Liberation Day”, reversing earlier growth expectations.
Exports to the US had accounted for the bulk of his plant’s production prior to Apr 2 last year.
Dr Runchana Pongsaparn, lead economist at the Asean+3 Macroeconomic Research Office (Amro), warned that the full impact has yet to be felt by the region. She expects it to unfold gradually through softer external demand, higher supply chain costs and more cautious investment.
In March, the Office of the US Trade Representative (USTR) opened new Section 301 investigations into multiple trading partners, including several South-east Asian economies – a move that could pave the way for fresh tariffs.
At the government level, Malaysia and Indonesia are uncertain about how to proceed with trade pacts agreed before the US Supreme Court struck down the “Liberation Day” tariffs. Singapore and Malaysia have said they will engage with the USTR over its Section 301 investigations.
Vietnam, a key beneficiary of earlier trade shifts, is now taking steps to diversify its exports.
“Many Vietnamese shippers are not reducing US exposure, but are actively broadening their market mix across the European Union and key Asian markets to reduce concentration risk,” Alexandra Kuzina, the Vietnam country manager at China-based freight forwarder GH Forwarding, told BT.
The tariffs are also reshaping supply chains, though not necessarily in the way Washington had intended.
“There are clear logistics signals that Chinese-invested firms are moving beyond simple transhipment and towards real production integration in Vietnam,” Kuzina revealed, citing rising imports of semi-finished components and machinery, alongside outbound shipments marked by longer lead times and more complex handling requirements.
Similar shifts are emerging elsewhere in the region.
Faith Toh, CEO of packaging manufacturer SB Group of Companies in Malaysia, said: “More Chinese companies are setting up plants across South-east Asia to access Comprehensive and Progressive Agreement for Trans-Pacific Partnership benefits and compete directly with us.”
Vietnam: Uneven gains as supply chains deepen
Vietnam’s export sector is showing early signs of diversification – though the gains have been uneven.
The US remains the country’s largest export market, accounting for about a third of outbound shipments last year. But growth is no longer concentrated in a single corridor.
Nguyen Phuoc Hien, manager at the Vietnam plant of US-headquartered electronics manufacturer Amphenol RF, said that America remains the company’s largest market, with a strategy centred on shifting more product lines from China to Vietnam to support exports.
“At the same time, our company continues to monitor and evaluate other markets to prepare for medium and long-term diversification,” he added.
Yet, the benefits of shifting supply chains have not been evenly distributed. Foreign-invested manufacturers such as Amphenol RF have captured much of the upside, with shipment volumes rising sharply by 26 per cent year on year in 2025, while export performance among domestic firms declined by 6 per cent, official data showed.
Structural constraints remain a key hurdle.
“A lot of Vietnamese manufacturers lack competencies in ownership and management, which makes it difficult for them to move from reactive to proactive sales, especially in international markets,” said Pietro Karjalainen, co-founder and chief strategy officer at FVSource, a Ho Chi Minh City-based manufacturing sourcing and advisory firm.
At the same time, competition is intensifying as Chinese-invested firms deepen their presence in Vietnam. What began as a strategy to circumvent tariffs is evolving into full-scale production integration.
In fact, even as Vietnam has become a major assembly hub, much of the raw materials and intermediate components used in its factories are still imported from China, which offers advantages such as higher production capacity, stable product quality and competitive costs.
Hoang Nhu Yen, CEO of Vietnamese furniture maker KPY Interior, noted: “We probably cannot compete on mass-produced, standard products made by Chinese companies here. Our strategy is to focus on custom, high-end segments – where labour-intensive craftsmanship offsets the cost advantages of China’s large-scale production.”
Manufacturers are also adjusting to rising “zero China content” requirements from Western clients by diversifying supply and sourcing locally to cut reliance on Chinese inputs. Hien said: “Localisation is an important step to control raw material costs, which are currently relatively high in Vietnam.”
Looking ahead, the pace of China-to-Vietnam investment may also slow amid shifting tariff dynamics. With US tariffs temporarily aligned at around 10 per cent for most countries, some Chinese firms may delay relocation plans.
“As long as tariffs are the same between Vietnam and China, there is no strong reason for Chinese companies to move production to Vietnam,” said FVSource’s Karjalainen.
“The question is whether lower costs in Vietnam are enough to justify the large investment, especially if the policy outlook is uncertain.”
Malaysia: Margins squeezed as exporters absorb the shock
Malaysian exporters are contending with weaker demand, thinner margins and a more uncertain operating environment, even as headline trade data remains resilient.
The volatility of US tariff policy – with rates shifting from 24 per cent to 19 per cent before a temporary reduction to 10 per cent – has made planning difficult.
Some shipments have been left unclaimed at US ports as buyers refuse to absorb higher costs, while others are renegotiating contracts or sharing the tariff burden to preserve relationships, said Chen of LH Plus.
Margins have come under sustained pressure. Exporters that previously operated at margins of 15 to 20 per cent are now seeing those shrink to around 8 to 10 per cent, leaving them more exposed to fluctuations in energy, labour and other input costs.
“Most exporters are willing to accept lower margins as long as they do not lose customers,” Chen observed.
Toh said that the SB Group of Companies, which exports up to 85 per cent of its products, has also seen sales decline sharply since “Liberation Day”.
While Malaysia has benefited from a relative tariff advantage over some competitors, that edge may prove temporary.
Some firms are already facing intensifying competition from producers operating across the region, where semi-finished goods are imported, processed or rebranded, and then re-exported, allowing them to maintain cost advantages while benefiting from preferential tariffs.
“This creates an uneven playing field for Malaysian exporters,” Toh pointed out.
Despite these pressures, Malaysia’s broader trade performance has held up, supported by strength in the electrical and electronics sector, which continues to benefit from the global demand linked to artificial intelligence (AI) and technology.
Looking ahead, exporters are increasingly diversifying beyond the US, expanding into markets within Asean, as well as Japan and Europe. They are also exploring new business lines such as contract manufacturing and medical products.
“The reality is that everyone is affected. The only difference is how much pain they can absorb,” Chen said.
Malaysia’s exporters face rising cost pressures even as overall trade performance remains resilient. PHOTO: BT FILE
Thailand: Tariff advantage holds, for now
Thailand’s exports to the US have held up despite tariffs, helped by early front-loading and a few sectoral gains.
The US remains the kingdom’s largest export market, taking about 20 per cent of total shipments.
Exports rose more than 30 per cent in 2025, driven partly by orders brought forward ahead of tariff deadlines, and partly by a relative advantage over competitors such as China and India.
That has shown up in specific sectors.
Pet food, rubber tyres and jewellery exporters have gained market share, and electronics – Thailand’s top export to the US – has remained strong, supported by continued demand for semiconductors and related components.
But the picture is not uniform. “Roughly half of Thai exports to the US are subject to reciprocal tariffs, so that portion of export growth has slowed down,” said Burin Adulwattana, chief economist at Kasikorn Research Center.
A bigger concern is transhipment – goods imported from China and then assembled or repackaged in Thailand before being exported. The authorities have identified 49 product groups at risk, many of them in electronics, including computers, semiconductors and consumer devices.
The US has indicated it may impose tariffs of up to 40 per cent on such products, which could affect a significant share of Thailand’s exports.
“I think Trump is fighting the affordability crisis in the US, so I don’t think he wants to open up the electronics war,” Burin noted. “The supply chain in Asia is so strong, so well-connected, it is hard to replace.”
At the same time, uncertainty over trade talks with the US continues. A deal is unlikely before a new government is formed following February’s election, delaying clarity for exporters.
For now, investment in Thailand’s electronics sector has held up, supported by longer-term supply chain shifts and demand linked to AI. But with tariffs, enforcement and policy still shifting, the outlook remains uncertain. - BY PETER JANSSEN
Indonesia: Deals in flux as policy uncertainty builds
Indonesia’s attempt to secure a bilateral trade deal with the US has run into fresh uncertainty, leaving exporters struggling to assess the outlook for one of their key markets.
The deal, signed on Feb 19, after months of negotiations triggered by the “Liberation Day” tariffs, had aimed to boost Indonesian exports by removing tariffs on 1,819 products, including palm oil, coffee, rubber and electronic components. It also offered zero import duties on textile and garment exports under a quota system.
But the agreement was thrown into flux almost immediately, after the US Supreme Court ruled that the tariff mechanism underpinning the policy was unlawful. Also, Jakarta has temporarily suspended the ratification process for the Agreement on Reciprocal Trade with the US after Washington launched new investigations under Section 301 of the US Trade Act.
At the same time, economists have raised concerns over the pact’s more contentious terms. Bhima Yudhistira, executive director of the Center of Economic and Law Studies, said that the deal could prove lopsided, requiring Indonesia to overhaul domestic regulations while offering limited reciprocal benefits.
Analysts have also pointed to “poison pill” provisions that could require Indonesia to align with US trade measures against third countries.
Suryaputra Wijaksana, an analyst at UOB Kay Hian, noted: “If the US imposes restrictive measures on a third country for economic or national security reasons, Indonesia must adopt measures with equivalent restrictive effect upon notification.”
Analysts say the prospect of tariff-free access for key Indonesian exports could ultimately outweigh those concerns if the agreement moves forward. PHOTO: EPA
Singapore: Muted impact, status as transhipment hub under strain
Singapore has so far largely avoided the fallout from US tariffs, with the economy growing a stronger-than-expected 4.8 per cent in 2025.
But that resilience may prove temporary. Amro’s Dr Runchana noted that last year’s resilience was partly driven by firms front-loading shipments and strong AI-related demand.
Uncertainty has also re-emerged this year after Washington signalled plans to raise tariffs to 15 per cent following the US court ruling that struck down earlier measures. Singapore’s Parliament heard in March that the Republic still faces the baseline 10 per cent tariff, though sectors more reliant on US demand – particularly parts of manufacturing – could be more exposed.
SMF’s Tan said the key concern is an “implementation fog” over how US tariff policies could evolve.
The impact on manufacturers has been uneven, with smaller firms facing margin pressure even as overall effects remain limited.
Other sectors face emerging risks. The threat of tariffs on branded pharmaceuticals has created strategic uncertainty even as implementation has been delayed, said Dr Pushan Dutt, professor of economics and political science at Insead.
Singapore’s position as a transhipment and logistics hub may also come under strain, with stricter rules targeting goods rerouted to avoid tariffs likely to raise compliance costs and divert trade flows, he added.
The Economic Strategy Review committees, which were formed last August to review the city-state’s economic strategy amid geopolitical alignments and rapid technological changes, are expected to release a full report with the committees’ final set of recommendations by mid-2026.
The Philippines: Limited direct hit
The Philippines has been largely insulated from the direct impact of US tariffs, reflecting its more domestically driven economy – though inflationary pressures in the US may tighten budgets and have an impact on business outsourcing demand.
Exports were a bright spot in 2025, rising 15.2 per cent after a decline the previous year, supported by front-loading and strong demand for electronics tied to the AI boom.
Shipments to the US – the country’s largest export market – rose 10 per cent, with semiconductors, which account for about 43 per cent of total exports, benefiting from tariff exemptions. Agricultural exports such as coconut products, bananas and pineapples also benefited from tariff exemptions under a bilateral trade deal.
Brandon Ong, country risk analyst at BMI, expects the effects of front-loading shipments to fade in 2026, even as the AI boom continues to support exports in the semiconductor sector.
While effective tariff rates have eased following the US Supreme Court ruling, Ong expects them to eventually revert to pre-ruling levels.
At the same time, a deal to increase imports of US goods – including agriculture, vehicles and pharmaceuticals – could introduce greater competition for domestic producers. Still, the impact may be cushioned by a weaker peso, which keeps imports relatively expensive.
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