What Trump’s second term means for Asian manufacturers

One of the key policy changes expected is the introduction of higher tariffs on key trading partners.

With Donald Trump's re-election as U.S. President, attention turns to the potential economic impacts of his second term, particularly on Asia and the Pacific.

A major development following Trump’s re-election was his announcement on 25 November 2024, regarding plans to impose sharp tariffs on key trading partners.

He said that he would impose a 25% tariff on exports from Canada and Mexico, alongside a 10% tariff on Chinese exports to the U.S. These moves, aimed at addressing issues like immigration and trade imbalances, could reduce U.S. GDP growth by over 1% in 2025.

Beyond direct tariff impacts, the uncertainty surrounding Trump’s trade policies is expected to slow investment. During his first term, trade policy uncertainty led to a reduction in U.S. investment by up to $47b in 2018 alone.

Trump’s re-election could usher in a more protectionist U.S. economic agenda. Proposals discussed during his campaign include a 60% tariff on Chinese imports and a 10-20% tariff on goods from other countries.

These policies, if implemented, are expected to lead to higher inflation, dampen GDP growth, and increase demand for domestic over foreign goods.

However, the implementation of these tariffs may require new legislation, complicating their swift enforcement. Congress, not the President, holds the authority to impose taxes, and further details, such as the impact on services or energy imports from Canada, remain unclear.

The economic fallout from Trump’s first term is already evident in Asia and the Pacific, particularly due to the ongoing U.S.-China trade war.

Tariffs imposed by both countries between 2018 and 2019 disrupted trade and shifted regional supply chains. Countries like Vietnam, Taiwan, and Bangladesh benefited from increased U.S. exports as Chinese imports to the U.S. declined.

Though the Phase One Trade Agreement in January 2020 reduced some tariffs, most remained in place, and the effects are still felt in the region.

A second Trump term could see further escalation of these trade conflicts, with potential new tariffs exacerbating disruptions to regional trade.