The Economic Dilemma ASEAN-6 is Facing

ASEAN-6 comprises the six largest member economies, Indonesia, Thailand, Singapore, the Philippines, Vietnam and Malaysia. Their combined nominal gross domestic product (GDP) amounts to USD 3.7 trillion, according to a DBS Bank report. This figure accounted for more than 97% of ASEAN’s total GDP of USD 3.8 trillion in 2023.

However, ASEAN-6’s economic size is not immune to Trump‘s tariff war, and is actually more vulnerable from a geopolitical perspective, which is more important for both the US and China. Some political analysts have said that among the ASEAN-6, leaders of Indonesia, Malaysia, Thailand and Vietnam could be tested more by Trump tariffs.

They could be hit by increased tariffs - Vietnam at 46%, Thailand at 36%, Indonesia at 32% and Malaysia at 24%. All is currently on hold as the world waits to see if Trump will implement this strategy of usimg higher tariffs to warn these countries to pull back from China.

Political analysts have commented that Trump’s tariff policies are pushing Southeast Asia further away from the US at a time when Washington needs regional allies in both economic and security matters. Trump believes this short-term policy can fix internal long-term problems. To reshore manufacturing to the US in the short term, America must still rely on goods produced in ASEAN that are critical for its supply chains.

Now one wonders if the the US will recognise that there are severe long-term consequences of its recent actions that will need to be mended from already fractured relations. However, Trump’s punitive tariff strategy may have the opposite effect as Southeast Asia disengages from the US as it is pushed into the welcoming arms of China.

China is taking this opportunity to move on with its agenda. During his recent tour of Southeast Asia, Chinese President Xi Jinping presented China’s vision for the region, emphasising unity against external confrontation. Xi pleaded that together they can safeguard the bright prospects of the Asian family during his visit to Malaysia in April. In the midst of the ongoing China-US trade war, Xi is being proactive in his regional engagement with China’s neighbours. Travelling to Southeast Asian nations that could be hard-hit by US tariffs is part of Xi’s long-term strategy he calls the “Asian family”.

While the Philippines and Singapore could be hit lower tariffs of 17% and 10% respectively, and the impact of growth slowdown is likely to be diminished less than the others. According to an OCBC Bank global market research report, Trump’s tariff war could reduce the growth forecast for Vietnam by 1.2%, Thailand by 0.8%, Malaysia and Indonesia by 0.2% as well as Singapore and the Philippines by 0.1%.

Furthermore, the OCBC Bank report published before the Trump tariffs announcement, the economic growth forecasts for 2025 were 6.2% for Vietnam, 2.8% for Thailand, 4.5% Malaysia, 4.9% for Indonesia, 2.2% for Singapore and 6.0% for the Philippines.

Hence, Ibrahim Anwar, Prime Minister of Malaysia, told CNA news, that the countries in ASEAN should persist in negotiating with the US as a bloc as Washington would be in a much stronger position in one-to-one bilateral negotiations. As the ASEAN chair, Anwar said the group should seek a collective response because individually, each country will not have the power to create effective resistance, But collectively, they might.

Geostrategist Azmi Hassan, a senior fellow at Malaysia-based Nusantara Academy for Strategic Research, told CNA that the ASEAN-6’s economic growth will be negatively impacted by the Trump tariffs, but the impact will vary across the different economies. Another economist, Cassey Lee, a coordinator for the Regional Economic Studies Programme at Singapore’s ISEAS-Yusof Ishak Institute, also told CNA he could not rule out the ASEAN-6 being hit with a recession, given that these economies are highly dependent on trade.

However, he noted that these was a chance that the tariffs could be reversed or reduced in the coming weeks and months, following negotiations between the respective governments and the Trump administration. If there is a slowdown in global trade, the most affected Southeast Asian countries will be those most dependent on trade, Singapore, Vietnam, Malaysia and Thailand.

For Indonesia, analysts have said that President Prabowo Subianto’s lofty economic growth target of 8% will be hamstrung by the US tariffs’ impact on key sectors, like apparel, footwear and electronics. Prabowo, who assumed his post in October 2024, has pledged to achieve an annual economic growth of 8% during his five-year term.

Economist Siwage Dharma Negara, the coordinator of the Indonesia Studies Programme at the ISEAS-Yusof Ishak Institute, told the press that a failure to negotiate lower tariffs with the US will dampen this ambition. If the 32% tariff by the US on Indonesian exports is fully implemented, this will pose a significant challenge to Prabowo’s ambitious goal during his term, he added. Such setbacks make even a 5% growth target more challenging to attain. Indonesia, Southeast Asia's largest economy, recently sent a high-level delegation to the US to seek a deal to ease the 32% tariff.

However, if ASEAN’s members can find ways to negotiate as a bloc, they could be more successful. Vietnam was the first to announce cuts in tariffs on US imports to zero, which made global headlines, as it seeks to postpone the 46% tariff to be imposed by Trump.

Hanoi also pledged to import US products that are in strong demand locally and promised to create more favourable conditions in exchange for American businesses investing in Vietnam. Trump described a call between him and Vietnam’s leader as very productive. Azmi told CNA that Vietnam has shown the way for other ASEAN countries to negotiate with the US, not to be retaliatory as this has been seen to further anger Trump.

Economist Cassey Lee added, ASEAN member states have to individually engage the US in bilateral discussions because different countries have different trade circumstances and considerations. Hence, ASEAN-6 is facing a dilemma with limited choices to rectify this matter.

Business / Business

The Economic Dilemma ASEAN-6 is Facing

Kamol Kamoltrakul 19 Posts

You may also like