Trump 2.0 and Asean: Potential Tariff Exposure

Economic

Summary:

Unlike Trump 1.0, ASEAN now faces increasing risk of direct effects of tariffs under Trump 2.0.

Unlike Trump 1.0, ASEAN now faces increasing risk of direct effects of tariffs under Trump 2.0. ASEAN can be exposed to product-specific tariffs, and the impact may be mitigated by universal nature, Standard Chartered's economists Edward Lee and Jonathan Koh report.

Tariff exposure can be a relative comparison

"Tariffs have been a central theme of President Trump’s election campaign. Since his inauguration, threats have been made but implementation has been delayed, raising expectations for negotiated solutions. Markets remain watchful amid uncertainty over execution and timing. We analysed the impact on GDP growth from the threats of universal tariffs on specific products – pharmaceuticals, lumber, iron and steel, copper, aluminium, semiconductors and automobiles. We found that Singapore, Malaysia and Vietnam will likely be the most negatively impacted should these tariffs go into effect. Tariffs on steel and aluminium have already been implemented, with Vietnam and the Philippines negatively affected; however, the hit to growth is likely to be marginal."

"Compared to Trump 1.0, where US-led tariffs were primarily focused on China, Trump 2.0 tariffs are broader. Under Trump 2.0, ASEAN will still face the indirect effects of US-led tariffs, with another 20% tariff already imposed on China. While there may be benefits from reallocation of production and exports for ASEAN, the region also faces more direct product-specific and reciprocal (details are scant here) tariffs this time around. While the direct effects will be negative, the universal nature of product-specific tariffs may lower the demand elasticity of US imports with respect to tariffs. In addition, we think the region is likely to be of secondary importance on tariff application compared to bigger economies such as China."

Source: FXSTREET

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Warren Takunda

Economic

Wall Street's mild bounce on the back of a tame CPI reading did not provide much impetus for Asian markets, leaving European investors with little cause for optimism.

One problem is that the inflation data, while offering some relief from the run of discouraging indicators lately, won't translate directly into a lower PCE price index - the Fed's preferred gauge of price pressures - because the cooling came mostly in services.

Another concern is that February's data doesn't fully capture the impact of President Donald Trump's wave of tariffs.

And ultimately, the primary worry for markets is not inflation, but growth.

On the subject of tariffs, Europe finds itself directly in Trump's sights after the EU's threat of counter-measures was met by a warning of reciprocal duties from the United States.

It remains to be seen whether Trump's approach to Europe mirrors the ramp-up-and-reprieve strategy used for Canada and Mexico, or the tax-and-then-tax-again model applied to China.

The good news is that, according to Germany's Kiel Institute, only a "small fraction" of targeted products from the EU are exported to the United States.

The scatter plot shows the total U.S. exports on the horizontal axis against the share of U.S. exports to the EU on the vertical axis between 2000 and 2024 with average lines on both axes. The top-right quadrant has been highlighted. Morning Bid: Tariff Worries Weigh as CPI Cheer Fades_1

Morning Bid: Tariff Worries Weigh as CPI Cheer Fades_1

Meanwhile, Britain continues to keep a relatively low profile, refraining from immediate tariff retaliation but keeping all options open.

That may be why sterling continues its steady climb while the euro is slipping back, albeit after a steeper ascent.

A majority of Americans believe Trump's economic policy has been too erratic, and an even greater number expect higher prices as a result.

Warnings from corporate America are also surfacing, with airline Delta and retail giant Walmart indicating that the unusually high level of economic uncertainty will impact their profits.

A potential de-escalation in Trump's trade war could be sown at home rather than due to tit-for-tat tariffs from major trading partners. However, a more than 10% slide in the S&P 500 in just three weeks doesn't seem to be prompting a reconsideration of U.S. policy.

Key developments that could influence markets on Thursday:

- UK RICS housing survey (Feb)

- Sweden CPI (Feb)

- Euro area industrial production (Jan)

- US PPI (Feb), weekly jobless claims