Trump Impact: Asia Pacific to See New Trade and Investment Dynamics

With US President Donald Trump’s second term officially beginning from January 2025, momentum is building around significant changes to US trade policy, specifically around higher tariffs and restrictions aimed at reducing the US’s trade deficits. The Asia Pacific (APAC) region is highly susceptible to this, as markets like China within the region featured among the top three exporters to the US in 2024. Amid the challenges, APAC economies are expected to see shifting trade dynamics by strengthening regional trade, reshaping FDIs, and exploring alternative trade and investment hubs. 

Shifting supply chains anticipated to create greater appetite for regional infrastructure development

As the new US administration imposes higher tariffs on China, companies are expected to continue to shift their supply chains away from China and explore opportunities in other APAC countries, leading to more investments in and development of market infrastructure in other parts of the region. While local companies will play an important role in the development, so too will Chinese firms looking to sustain their businesses by investing in new production, distribution, and infrastructure facilities in APAC countries such as Vietnam, Indonesia, Thailand, Malaysia, Myanmar and others. In fact, this is a trend that already started, to a certain extent, in the aftermath of the global pandemic, where Chinese investments in Vietnam increased by 80% in 2023, with provinces like Hanoi becoming investment hotspots. The new US policies are expected to accelerate this investment not only to bypass US tariffs but also to maintain closer access to global markets. 

A look further at specific APAC markets’ FDI data further testifies the supply diversification trend. Total FDI inflows registered by China in 2023 were USD160.7 billion (at constant exchange rates), a decrease of 9.2% compared to 2022. On the other hand, FDI inflows registered by Vietnam and Singapore grew by 5.7% and 10.2%, respectively, during 2022-2023 and are expected to see more in the coming months and years. Improving productivity, large labour pools, and business-friendly operating and trade environments are key characteristics that favour APAC markets like Singapore and Vietnam as viable alternatives to China as FDI receivers. Leveraging potentially growing investments, the government of Vietnam is targeting 8% real GDP growth in 2025. Even though Vietnam is expected to be a recipient of increased investment, it is also vulnerable to US trade policy (as shown in the chart above) given its large trade surplus with the US, and therefore it is expected to pursue several other actions such as trade diversification, promoting US imports and others. Vietnam also seeks to rebalance its trade relations with the US to reduce its vulnerability to President Trump’s tariff measures.

In 2024, Vietnam’s trade surplus with the US stood at USD121 billion, significantly up from USD54 billion in 2019

^{Source: Euromonitor International}

Vietnam plans to increase imports of US agricultural products such as cotton, soybeans and tree nuts. It also intends to tap into liquified natural gas (LNG) from the US to diversify the country’s energy import sources.

Trade diversification key to mitigate risks and sustain economic growth

Apart from Vietnam, several APAC nations are increasingly exploring new markets in Europe, Africa, the Indian sub-continent, and Latin America to deal with increased uncertainty in the global market, reduce trade dependency on specific markets and cushion against external shocks.

Between 2014 and 2024, EU imports from ASEAN countries grew significantly by 55.7% in USD terms, reaching an all-time high of USD158 billion by the end of the period

^{Source: Euromonitor International}

Markets like Australia leveraged its trade diversification with partners like India to expand its market access by capitalising on India’s expanding demographics, manufacturing capabilities, strong urbanisation and economic growth prospects. Under the Australia-India Economic Cooperation and Trade Agreement (ECTA), over 85% of Australian goods exports by value to India are now tariff free, rising to 90% by 1 January 2026. High tariffs have been reduced on some further agricultural products. In addition, 96% of imports from India are now tariff free, rising to 100% by 1 January 2026. This had a positive impact on Australia’s economic outlook as India now ranks among the top markets for Australia’s services exports. Australian exporters gained full or partial access to over 85 Indian service sectors under ECTA. Education, business services, research and development, financial services and healthcare and tourism sectors all saw improved market access as a result.

Leveraging market foresight to seize growth opportunities in APAC

The APAC region is set to witness both challenges and opportunities in the coming years. An intensification of global trade tensions with higher tariffs and more protectionism would affect the growth outlook of the region’s trade-dependent economies. Meanwhile, Southeast Asian countries like Vietnam and Singapore are likely to attract more FDIs, benefiting from China’s redirected investments and supply chain diversification. 
Beyond trade and production shifts, growth in the region will also stem from evolving demographics and rising demand, creating opportunities for both B2B and B2C businesses in the region. To manage risks and capitalise on trade and investment opportunities in these markets, companies must enhance their market foresight and intelligence to navigate changes and maintain a competitive edge as well as sustain growth. 

Learn more about the impacts of Trump’s policies in our article Trump’s Renewed Presidency: Effects on Economy, Inflation, Trade and Emerging Markets and report Navigating New Trade Landscape: The Impact of US Trade Tariffs on Key Industries.