APAC Economic Perspectives_ASEAN_ Assessing tariff risks

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the ASEAN region and its exposure to potential tariff risks stemming from the evolving trade policies of the United States, particularly under the new administration's approach, referred to as "Trump 2.0" [1][2]. Core Insights and Arguments 1. Differences in Trade Policy: The new US trade policy is characterized by rapid tariff announcements and a broader range of affected countries, moving from a focus on China to include multiple nations due to a universal 25% tariff on steel and aluminum [1][2]. 2. Country-Specific Tariff Risks: Countries like Vietnam, Thailand, and Malaysia face higher risks of specific tariffs due to their trade surpluses with the US. In contrast, Singapore may be less affected due to its trade deficit and lower import tariff rates [2][3]. 3. Impact of Broad-Based Tariffs: The economic impact of broad-based tariffs is complex and cannot be easily quantified. However, a 10% universal tariff could potentially drag down growth by 0.1-0.6 percentage points, particularly affecting open economies [3][4]. 4. Currency and Trade Flow Effects: Broad-based tariffs are expected to weaken regional currencies and negatively impact trade flows, although the direct exposure of ASEAN economies to the US is relatively small, ranging from 0-0.5% of GDP [3][4]. 5. Government and Central Bank Responses: ASEAN governments are likely to avoid significant retaliation to US tariffs to maintain trade relations. Central banks may adopt more dovish stances to accommodate currency weakness, with potential rate cuts anticipated in Thailand and Malaysia if tariffs escalate [4][5]. Additional Important Insights - Sector-Specific Exports: ASEAN's largest exports to the US include electronics, food, apparel, and pharmaceuticals. Tariffs on these sectors could pose significant risks to economic growth [2][3]. - Trade Balance Dynamics: Most ASEAN countries, except Singapore, have trade surpluses with the US, which could make them targets for future tariffs [2][8]. - Tariff Structures: The report outlines the effective tariff rates for various product categories, indicating that consumer goods and food products face higher tariffs compared to capital goods [19][20]. This summary encapsulates the critical aspects of the conference call, highlighting the potential implications of US trade policies on the ASEAN region and the responses from governments and central banks.