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 his plans to impose sharp tariffs on trade partners that could potentially amplify trade tensions and fragmentation, a report by the Asian Development Bank revealed.
On 25 November 2024, Trump 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 in the US, dampen GDP growth, and increase demand for domestic over foreign goods. Additionally, retaliatory tariffs from China, European Union (EU), and other trade partners would further constrain US exports and dent the benefits produced by higher tariffs for the trade balance.
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.
