At a recent seminar exploring the future of global trade, titled “Trump's Liberation Day: Assessing the impact of US Tariff Policy on Southeast Asia”, a panel of experts explored the immediate and longer-term consequences of United States President Donald Trump’s sweeping tariff measures on the global economy, particularly on Southeast Asia.
A prolonged trade war between the United States and China could deliver a heavy blow to Southeast Asia, where economies remain deeply tied to global supply chains, foreign investment, and export-driven growth. For the ASEAN region, the fallout could present both significant economic headwinds and complex strategic dilemmas. Against this backdrop, panellists argued that the very architecture of global trade is being shaken.
“We've already moved beyond tariffs,” said Professor Stephen Olson, Visiting Fellow at the ISEAS-Yusof Ishak Institute, and Visiting Lecturer and Non-Resident Fellow at the Yeutter Institute of International Trade and Finance. “One way it may go is that countries actually cut trade deals to get out from under Trump’s reciprocal tariffs. The other thing we may see is a number of countries saying, ‘we're going to punch back’. Once you start going down that road of tit-for-tat retaliation, we don't know where it will end.”
A trade war without borders
Professor Olson, who has studied trade policy for decades, warned that the parallels to the 1930s were not superficial. The Smoot-Hawley Tariff Act exacerbated the Great Depression by setting off a wave of retaliatory tariffs worldwide. Today's situation, he argued, could prove even more catastrophic because of the deeper interconnectivity of modern economies.
And if major economies like the US and China start weaponising different sectors against each other, the systemic shock could be profound. Professor Olson added, "China is restricting access to critical minerals, adding US companies to the de facto blacklist. The EU is going after services, digital platforms like Facebook and Google. We're not going to stop at tariffs."
He described the dissolution of a rules-based global trade system: "In the old system, a country like Thailand could stand up at the World Trade Organization (WTO) and say to the US, 'You're hitting us with an unfair trade practice,' and win. Can anyone picture Donald Trump doing that? We are moving into a law-of-the-jungle phase."
Investor uncertainty and currency shifts
Ms Selena Ling — Chief Economist & Global Head, Global Markets Research & Strategy, OCBC — agreed, saying, “It's no longer just about tariffs, it's also about non-tariff measures, economic conformity, and geopolitical alignment.”
As geopolitical alignment shifts, so too does market confidence, with investors increasingly hesitant and regional currencies reacting unpredictably. Furthermore, the impact of a trade war may be punitive towards Asian economies, as both the US and China are among the region’s top three trading partners. “ASEAN would still be a fairly attractive manufacturing base,” Ms Ling said, but US multinational corporations may take a slightly longer-term point of view — “Manufacturing plans that they opened today, whether in Thailand or Indonesia, were decisions made 2-3 years ago, so they may hold off for a little bit longer until there is better clarity on tariffs, but they are likely to still invest further in the ASEAN economies.”
Additionally, Ms Ling warned that the US dollar’s dominance could erode. She pointed out that, when the Liberation Day tariffs were first announced, “ASEAN currencies depreciated against the dollar, but subsequently, when people get worried about a potential US recession, then the de-dollarisation narrative surfaces and ASEAN currencies strengthen against the USD.”
“The USD has enjoyed such a privileged position of being the world’s reserve currency. It will take years, of not decades, to diversify away from the USD, but it is quite clearly and gradually happening. That’s not to say the euro, the yen, or the sterling can replace the USD anytime soon. But the more protracted this trade war is, the more it may call into question, ‘how much longer will the USD's reserve currency continue?’”
Geopolitical fault lines and growing decoupling
Professor Henry Gao, Professor of Law at Singapore Management University and Senior Fellow at Centre for International Governance Innovation (CIGI), offered a starker view of the Liberation Day tariffs, where other countries are collateral damage in the US-China trade war: “When Trump is negotiating with all these countries, a big part of these new trade agreements is going to be about China, to cut China out of the supply chain.”
At the time of the seminar on 28 April 2025, trade relations between the United States and China were locked in a tense stalemate. President Trump’s sweeping tariff hikes on Chinese imports had been swiftly met with retaliatory measures from China. Within days, the tit-for-tat escalated, with reciprocal tariffs soaring to over 100 per cent in both directions.
Though the seminar preceded the 12 May Geneva agreement, Professor Gao had predicted that China would return to the negotiating table by the end of June, as signs of economic strain were already surfacing, with small and medium-sized firms cancelling orders and laying off workers in response to the deepening economic decoupling. Indeed, following a weekend of negotiations in Geneva, the US and China announced a 90-day truce, agreeing to temporarily scale back some of the tariffs imposed during the standoff.
Can ASEAN afford to pick a side?
With the trade dispute escalating quickly, uncertainty was running high. Several audience members voiced concerns about the volatility of trade policy, negotiations, and burgeoning trade wars. One participant asked whether ASEAN countries should aim to strengthen ties with other countries, such as China, Japan, and Belgium, to reduce their dependence on the US and the Trump administration.
“Absolutely, yes,” Professor Olson said. “We've seen some shocks before to the trade system, and the trading system is still here. [But now there’s] One big difference — we’ve got the driving force behind the system challenging everything and taking a sledgehammer directly and deliberately to the whole system and undermining the fundamental premise. That’s fundamentally different and causes me to believe that we’re at a historic point.”
Reinforcing this, Ms Ling suggested a broader outlook: “Is there a role for strengthening ties with China and Japan? The way I see it, there's a greater role for strengthening ties with outside of the G5 nations. That would be the Gulf Cooperation Council (GCC), Middle East and North Africa (MENA), and Latin America (LATAM), because all these are not in the crosshairs of this whole trade war.”
In response to whether ASEAN could disconnect from China given the deep integration of trade and supply chains, the consensus among the speakers was that it would be “Very difficult.”
A tightly woven supply chain and a fraying future
However, Professor Gao shared, “If you look at intra-industry trade — the trade of similar products, such as electronics, within the same industry — ASEAN has the highest percentage of intra-industry trade of all regions in the world. That’s because if you look at products such as the iPhone, in the manufacturing process, you would have all these parts and components going back and forth between different countries.”
“But does that mean that ASEAN cannot be delinked from China? I would say no, because this high-level trade is largely dictated by international firms, especially American firms, which are doing manufacturing in this region, because they saw that, for example, Taiwan has an advantage in manufacturing chips, and Korea has an advantage in manufacturing memory. That's why they allocated the different production processes to different countries. But after Liberation Day, everything will change,” Professor Gao noted, adding that some shifts are already underway. “As we have already seen, Apple has said it will shift the majority of its production for the US-bound iPhones to India. We are going to look at a whole new world,” he said.
Ultimately, if the warnings from these experts play out, policymakers across the globe, including in Southeast Asia, will need to review their economic strategies to ensure they remain resilient in the face of trade shocks and unpredictability.