ASEAN faces some of the highest reciprocal tariffs, with Vietnam and Cambodia potentially suffering major GDP blows, while Indonesia may see limited impacts

•    ASEAN faces relatively high reciprocal tariffs from the US, with CLMV (Cambodia, Laos, Myanmar, and Vietnam) subject to reciprocal tariffs as high as 45-49%. Thailand and Indonesia are subject to 36% and 32% reciprocal tariffs, respectively, while Singapore is subject to the lowest rate among ASEAN countries at 10%. However, certain goods are exempted from reciprocal tariffs, such as semiconductors, pharmaceuticals, lumber, copper, bullion, and items under Section 232, including steel, aluminum, automobiles and parts, which are currently subject to 25% import tariffs. 

•    The US reciprocal tariffs may severely impact the regional economy, based on each country’s reliance on exports to the US and the export dependency of its economy, with Vietnam and Cambodia facing the greatest risk.
•    Vietnam: If its trade talks with the US fail, it risks attracting less foreign investment and facing a contraction in exports, specifically in the electronics, furniture, textile and footwear sectors.

•    Foreign investment, from which Vietnam benefited significantly during the trade war, may decline. However, the semiconductor industry is still expected to have the potential to attract investment, as the import tariff is at a 25% baseline rate worldwide. 
•    Vietnam’s exports in 2025 are expected to contract to -4.5%, down from the previous estimate of 12.0% expansion, with the following details:

o    Direct impact: Vietnam’s exports to the US are expected to contract by -8.1% in 2025 due to decreased demand for products for which Vietnam relies on the US market, such as electronics, furniture, clothing, footwear, toys, games, and sports equipment.

o    Indirect impact will be experienced through: (1) exports of goods related to the supply chain that China exports to the US, particularly electronic parts, cotton yarn, and corrugated paper; (2) Vietnam’s exports to other markets that are likely to face increased competition from China, such as computers and parts, toys, games, and plastic products. 

•    Regarding the negotiation progress with the US on April 4, 2025, the Vietnamese government requested the US to postpone the implementation of reciprocal tariffs during the trade negotiations. On March 31, 2025, Vietnam announced a reduction in import tariffs on automobiles, LNG, ethanol, and several agricultural products, such as apples, almonds, and cherries. The Vietnamese government also committed to importing aircraft, natural gas, high-tech products, and agricultural goods from the US, demonstrating cooperation in addressing the trade imbalance between the two countries. Furthermore, the Vietnamese government is reviewing concerns raised by the report of the United States Trade Representative (USTR) regarding Vietnam, such as data and cyber restrictions, problems in enforcing intellectual property laws, and lack of transparency in customs procedures and import licensing.  

•    Indonesia: Although facing limited impacts, the government is preparing for trade negotiations to cushion the mineral refining and palm oil sectors.

•    The impact on foreign investment is limited because Indonesia is a target for foreign investors to expand their domestic market. Additionally, government measures to attract investment in midstream production projects in the mining industry and large-scale construction projects, including the new capital city construction plan, are expected to have a positive effect on the overall economy.
•    Direct impact on exports is limited, while indirect impact may drag Indonesia's total exports for 2025 down to a contraction of -3.3%.

o    Direct impact: Indonesia relies on the US market for 10% of its exports. Most exported goods utilize domestic resources that retain a competitive edge in the US market and remain in demand. However, exports may contract as US purchasing power will be affected by higher tariffs, reducing demand for food and consumer goods, which account for 55% of Indonesia’s exports to the US. The remaining exports are intermediate products for manufacturing, capital goods, and commodities. Overall, this impact will drag down Indonesia’s key exports such as palm oil, footwear, tires, seafood, rubber, and electronic components. 

o    Indirect impact: The slowdown in the Chinese and ASEAN economies, which are Indonesia's main trading partners, that account for 41% of Indonesia's exports. This results from the drag on intermediate goods and commodities that Indonesia exports to these markets, representing more than half of total exports, such as steel, minerals, coal, palm oil, wood, and chemicals. Meanwhile, Indonesia's passenger car exports may be affected by the slowdown in ASEAN purchasing power in the near future.

•    The Indonesian government has been in discussions with the US since early 2025 but remains subject to a 32% reciprocal tariff. However, Indonesia is preparing to dispatch a high-level delegation to negotiate easing the tariff impact, focusing on reviewing concerns previously raised by the USTR’s report, such as improvements to the import licensing system, Halal regulations, and Islamic law requirements that may hinder trade.
•    Cambodia: Reciprocal tariffs may put Cambodia’s investment at greater risk as it is heavily dependent on Chinese investment. The projected contraction in Cambodia’s exports could adversely affect its textile, apparel, footwear, and travel-related product industries.
•    Foreign investment in Cambodia, with over 50% sourced from Chinese capital, is facing a negative outlook due to the end of trade benefits as a Least Developed Country (LDC) in 2029. The additional 49% reciprocal tariffs from the US further reduce Cambodia's ability to attract FDI. 
•    Cambodia's exports in 2025 are expected to contract by -5.3%, down from the previously estimated 11.9% expansion, with the following details:

o    Direct impact: Cambodia's exports to the US are expected to contract by -9.2% in 2025 due to decreased demand for products heavily reliant on the US market, such as clothing, footwear, travel goods, furniture and wood products, plastic products, toys, games, and sports equipment. 

o    Indirect impact: This will manifest through (1) reduced export of goods related to the supply chain for China’s exports to the US, particularly tanned leather, unwrought aluminum, and unrefined copper, etc. (2) Cambodia's exports to other markets that are likely to face increased competition from China, especially furniture and wood products.

•    Regarding the latest update from the Cambodian government as of April 3, 2025, the Cambodian Ministry of Commerce expressed disagreement with the 49% reciprocal tariff, stating that Cambodia’s average import tariff on US goods is 29.4%. However, the Ministry of Commerce is trying to negotiate with the US government. Nonetheless, the USTR has raised concerns about Cambodia, regarding issues such as corruption and the enforcement of intellectual property protection laws.

•    Laos: China’s economic slowdown may indirectly affect Laos, particularly its key exports to the US, including apparel, footwear, and coffee.

•    The impact on foreign investment is limited and the investment may be delayed due to economic slowdown in originating countries, especially investments from China and Thailand, which account for 66% and 18%, respectively. However, Laos still attracts investment in alternative energy production and agricultural product manufacturing and processing to support consumption in China and neighboring countries. 
•    Laos' exports in 2025 are expected to be at risk of contraction due to energy prices and the indirect effects of economic slowdown in major trading partners like Thailand and China.

o    Direct impact: The increase in reciprocal tariffs to 48% significantly affects exports to the US, with most product categories likely to see substantial declines, such as footwear, wooden furniture, clothing, electronic equipment, and coffee. However, this has a relatively minor impact on overall exports since the US accounts for less than 1% of Laos’ exports. 

o    Indirect impact: The major drag on Laos' exports stems from China and Thailand, which are key trading partners accounting for 73%. The slowdown is expected following the announcement of reciprocal tariffs. Additionally, exports of energy products, which are the main export items, are also declining as energy prices tend to adjust downward. Other products are also likely to slow down in line with the economic outlook, such as paper, agricultural products, wood, rubber, and fertilizers.

•    The Lao government has not yet issued an official statement, while the USTR report highlights issues the US wants to address, such as reducing high excise taxes on vehicles, improving transparency in customs processes, and strengthening intellectual property enforcement to combat counterfeit goods.

•    Initially, reciprocal tariffs are expected to have the most negative impact on the GDP of Vietnam and Cambodia, with estimated declines of 1.5% and 1.4%, respectively. Laos and Indonesia are expected to be less affected, with GDP reduction of 0.8% and 0.6%, respectively. Reciprocal tariffs are anticipated to significantly affect the manufacturing base of Vietnam and Cambodia, potentially impeding long-term economic growth. In contrast, the impact on Indonesia is limited due to its large domestic market, low reliance on exports, and possession of key minerals used in high-tech product manufacturing, which continues to attract foreign investment in the long term.

        The imposition of reciprocal tariffs by the US on all nations is seen as a negotiation tactic to secure new trade agreements. Therefore, it is necessary to monitor the outcomes of these negotiations, which will determine the future direction of trade, investment, and economic trends for each country.
        Currently, a combined value of Thai exports to Vietnam, Indonesia, Cambodia, and Laos amount to USD35 billion, accounting for 12% of Thailand's total export value. An economic slowdown in the ASEAN region may affect Thailand's exports to these countries.

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