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When Donald Trump announced reciprocal tariffs of up to 49 per cent on south-east Asia’s major manufacturing economies last April, the outlook for the export-driven region looked bleak. There were fears that companies pursuing “China plus one” strategies — using the region as a secondary base to reduce exposure to punitive duties on Beijing — might relocate. The US president’s aggressive protectionism also came as leaders from Hanoi to Kuala Lumpur were bracing for intense competition in domestic and international markets from cheap Chinese goods that were previously bound for America.
But south-east Asia has confounded the pessimism and displayed an impressive resilience. Sales to the US continued to rise last year. The region’s total global goods exports were 15 per cent higher in October 2025 compared with the previous year, equivalent to roughly $300bn in additional exports when annualised, according to a recent analysis by the Lowy Institute. Foreign direct investment into the region’s main industrial economies has also increased, driven by multinationals’ efforts to diversify supply chains. Vietnam registered 8 per cent economic growth in 2025, and is targeting double digits this year.
Much of this strength reflects nimble responses by both businesses and policymakers. The private sector reacted to tariff threats by frontloading shipments and rapidly reconfiguring supply chains. While some of the export strength reflects the rerouting of Chinese goods, Asean sales to non-US markets have also grown robustly. Regional producers have further protected margins by importing lower-cost intermediate inputs from China.
Pragmatism from regional leaders meant the US’s steep “reciprocal” duties were slashed in bilateral negotiations. A combination of fiscal and monetary support propped up economies, and there were promising talks to improve trade ties both among Asean members and beyond.
The bloc’s underlying manufacturing advantages have helped. Existing efficiencies and expertise means producers commanded a cost advantage even with tariffs. The reduction of Trump’s duties, to below rates faced by China, and the weak dollar have reinforced the attractiveness of places like Vietnam, Cambodia and Thailand for FDI. The global technology boom has provided another tailwind, boosting exports of electronics, in which the region has a specialism. Many high-tech products have been exempted by the White House from tariffs.
Still, south-east Asia’s robust economic performance should not breed complacency. The Trump administration has pledged to crack down on goods it deems “transshipped” from China and has signalled in talks that it may not tolerate high Chinese content in final products exported to the US. An influx of cheap Chinese consumer goods is also creating pockets of economic stress across the region. Indeed, Asean remains too exposed to both superpowers.
The region should build on the resilience its economies have shown so far. That starts with structural reforms at home. Efforts to cut red tape, strengthen workforce skills and boost road, rail and port infrastructure would bolster cost advantages. Improving social safety nets would also prop up domestic demand. Next, policymakers should deepen trade and investment ties with new markets and within the region itself. IMF analysis suggests that reducing non-tariff barriers could lift Asean’s GDP by 4.3 per cent over the long run.
South-east Asia’s experience shows that openness and competitiveness can be a source of growth, even as trade barriers rise. Deep integration into global supply chains has made the region invaluable to businesses and hard for the world to bypass. To turn its resilience into momentum, it should lean into its strengths.
