Trump’s Tariffs Strain Vietnam and Southeast Asia's Growth Prospects

As US President Donald Trump's tariffs take effect, Vietnam and Cambodia are among the hardest-hit Southeast Asian nations. With rising tariffs jeopardizing their strong export-driven economic growth, these countries are scrambling to mitigate potential fallout and negotiate better terms as they navigate the changing trade landscape.

US President Donald Trump's recent implementation of sweeping tariffs has cast a shadow over the economic achievements of Southeast Asia, particularly for countries like Vietnam and Cambodia. With tariffs soaring to 46% and 49% respectively, they find themselves among the most affected nations outside of China. Thailand (36%), Indonesia (32%), Malaysia (24%), the Philippines (17%), and Singapore (10%) also face significant impacts from the new trade restrictions.

The region’s economic success over the past thirty years has relied heavily on robust export levels, particularly to the US. For Vietnam, exports to the US constitute approximately 23% of its GDP, while Cambodia is even more reliant, with 67% of its GDP tied to this export market. This development trajectory is now threatened by the punitive measures imposed from Washington.

Vietnam, led by Communist Party Secretary-General To Lam, has ambitious plans to transition towards a knowledge-and-tech-driven economy by 2045, targeting an annual growth rate exceeding 8%. A crucial element of this strategy includes increasing exports to the US, which was recently formalized through a Comprehensive Strategic Partnership established in 2023. However, these economic plans face severe obstacles as tariff pressures complicate their implementation.

In Thailand, although reliance on US exports is lower—accounting for less than 10% of GDP—economic performance has faltered over the last decade, making the new tariffs an additional burden. Meanwhile, Cambodia’s political landscape is particularly vulnerable, and the tariffs threaten economic stability. The garment sector, which employs about 750,000 people and provides crucial income for many Cambodians, could see significant job losses as a direct result of these tariffs.

As countries in Southeast Asia respond to Trump’s trade policies, their strategies emphasize negotiation rather than retaliation. Vietnam has sent Deputy Prime Minister Ho Duc Pho to advocate for the country’s interests, proposing the elimination of tariffs on US imports. Similarly, Thailand’s finance minister plans to appeal to the US in hopes of reducing tariffs and increasing American purchases, including food and aircraft.

Despite these pleas, the US administration remains steadfast, with trade advisor Peter Navarro dismissing Vietnam's proposals as ineffective. He has expressed concerns over trade practices, alleging that a significant portion of Vietnamese exports could be disguised Chinese goods aimed at sidestepping US tariffs.

This complex trade scenario also affects Myanmar, which faces a staggering 44% tariff despite being embroiled in civil conflict and having limited capacity to engage in trade with the US. The garment industry represents a precarious source of income for families in conflict zones, further complicating the repercussions of these tariffs.

Ironically, Trump had previously enjoyed a measure of popularity in Southeast Asia, praised for his assertive foreign relations. Yet the sudden shift to imposing tariffs has reshaped regional sentiments, leaving nations like Cambodia now in desperate negotiations to ease their economic burdens while grappling with the specter of lost trade.

As Southeast Asia faces an uncertain economic future marked by these tariffs, the implications of the US-China trade war loom large, with broad consequences reaching far beyond national borders.