There is no denying that a second Donald Trump presidency will impact Asia’s economic outlook. Having spent much of his campaign highlighting a plan to introduce sweeping tariffs, including as much as 60 percent on Chinese imports, governments and businesses are trying to come to terms with how the situation potentially changes. Yet, the region’s resiliency should not be overlooked either. Asian Insiders Managing Partner Jari Hietala offers a perspective on what the future may hold over the next four years and beyond.

Experts have gone on record saying the impact of a second Donald Trump presidency on Asia’s economic outlook is anywhere between doom and gloom to a belief the region can persevere. The wide range of viewpoints highlights the one constant. No one really knows what to expect during the next four years.

That’s because of Asia’s unique position as the world’s trade crossroads. Countries here make up part of 49 of the world’s 80 largest trade routes, according to UN Comtrade. It is also home to more than 50 percent of global trade value.

These are also why it has been embroiled in trade tensions under the incoming US presidential administration. While China is expected to bear the brunt of tariffs, ASEAN nations, many of which America has a noticeable trade deficit with, could come under greater scrutiny as well. Even long-time partners, such as Japan and South Korea, are monitoring the situation.

A major campaign promise was imposing tariffs of 60 percent, or even higher, on Chinese imports while ending the country’s most-favoured-nation trading status. Elsewhere, 10 to 20 percent tariffs on all other foreign goods was a point mentioned on several occasions.

There is no consensus on how this plays out. Some claim these tariffs will be enacted as promised. Others believe this is a negotiating ploy to gain concessions from trading partners. Given the volatility involved, uncertainty should linger until action is taken.

Resilient Asia

There can be no denying that economies across Asia are hugely dependent upon exports. And with the United States being a crucial trading partner for many countries, tariffs of any size would create challenges. Yet, recent history shows us even the worst-case scenario can’t entirely derail the region.

Asia accounted for 57 percent of global GDP growth between 2015 and 2021. Of course, that period covers Trump’s first term and the outbreak of the China-US trade war. Even in what was widely viewed as unfavourable market conditions, the region still prospered.

An inward-facing United States may also open doors elsewhere for Asia. For instance, the European Union could explore additional free trade agreements (FTA) and partnerships. FTAs are already in place with Singapore and Vietnam, while negotiations continue with Thailand. The EU has an economic partnership with Japan as well.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could take an expanded role moving forward. Japan, Singapore, Malaysia, Vietnam, and Brunei are founding members. When the UK joins in December 2024, the CPTPP will have 12 parties. Several countries have already expressed interest in being part of the agreement. More could follow if the US follows through on the implementation of market barriers.

Finally, America introducing a tariff on all non-Chinese foreign goods with no exemptions could possibly be the best of a bad situation. At the very least, no country would have a distinct advantage. And given the United States’ shortcomings in certain sectors, they would still have some reliance on imports.   

Domestic concerns

Advisors to the President-Elect will make sure he’s keenly aware that inflation and the higher costs of everything from goods to building materials were among the key issues which propelled him to the White House. Broad tariff hikes along with a short-term focused monetary policy would only make those worse.

Concerns at home could mean larger tariffs are pursued down the road. Instead, a few small token gestures would be introduced in the first 100 days. This aligns with how the situation unfolded during Trump’s first term when he withdrew from the Trans-Pacific Partnership and went after the North American Free Trade Agreement before introducing larger-scale tariffs in January 2018 that were the opening salvo in what would become the China-US trade war.

Looking long term

Perhaps the most significant difference between the first Trump presidency and his upcoming second term is that there is no spectre of him serving beyond 2028. One of the lingering uncertainties during 2016-2020 was how long he would be in office. This is no longer an open-ended question.

Now, it is impossible to predict just how the next individual to assume office would handle any tariff increases or other measures potentially hindering global trade. In fact, outgoing President Joe Biden kept many tariffs on Chinese goods that Trump rolled out in place.

However, greater predictability in the United States is hoped for at the very least. One of the most pressing challenges for Asian economies is the volatility in decision-making the next four years could bring. Regardless of political party, many regional capitals will be looking for a more measured approach from the Oval Office starting in 2028, although it is far too early to say if that will be the case.

Final thoughts on how Trump impacts Asia’s economic outlook

It is impossible to say how a second Donald Trump presidency impacts Asia’s economic outlook. The United States will certainly place a greater emphasis on protectionist trade and monetary policies. Yet, foreign investors and businesses should not fall into the mindset that the sky is falling.

Even with the outbreak of the China-US Trade War during his stint in office, more than half of the world’s GDP growth took place in Asia between 2015 and 2021. Should worst-case scenarios play out, many regional economies will still record growth over the next four years. Expectations should be tempered, not done away with entirely

For foreign companies and investors, the most critical aspect to consider as it relates to market entry in Asia during this time is where you can achieve success. Business will not stop here, regardless of what is happening at the political level.

Having a local partner who can assist in identifying the right opportunities in Asia can help land you on the right path through periods of potential volatility.

To learn more about opportunities in Asia and assess your readiness to enter the market, schedule a no-obligation call with Jari Hietala, Managing Partner: jari.Hietala (at)asianinsiders.com