September 24, 2025
BANGKOK – A report by the United Nations Development Programme (UNDP) warns that recent changes in US tariff policy have had a significant impact on ASEAN economies, with total exports to the US projected to fall by as much as 9.7 %. The heaviest losses are expected for export-driven economies such as Cambodia, Vietnam and Thailand.
Cambodia most at risk
Cambodia is seen as the most vulnerable, with exports to the US forecast to contract by 23.9 %. The country relies on the US for around 58 % of its total exports and faces average tariff rates close to 19 %. In addition, Cambodia could come under scrutiny as a potential transhipment hub for goods seeking to bypass US duties.
Vietnam’s exports plunge, GDP hit
Vietnam is next in line, with exports to the US expected to decline by up to 19.2 %, according to the UNDP. Key sectors, including garments, footwear and electronics, now face average tariffs of roughly 20 %, and the US has accounted for 36.6 % of Vietnam’s overall export volume.
Philip Schellekens, UNDP’s chief economist for Asia-Pacific, told Reuters that in a worst-case scenario, a 20 % tariff hike triggering severe inflation in the US could slash Vietnam’s export earnings by as much as US$25 billion (around 790 billion baht) in a single year, nearly one-fifth of its annual total.
“No ASEAN country is harder hit by the US tariff hikes than Vietnam,” Schellekens said. “And in terms of absolute trade value, only China in East Asia suffers more.”
Vietnamese customs data already reflect the shift. Exports to the US in August slipped 2 % from July, with footwear, in which Vietnam is the world’s second-largest producer, plunging 5.5 %. Overall, the downturn in exports is expected to drag Vietnam’s GDP growth down by about 5 %.
Long-term effects and mitigation
The full impact may take years to materialise, though some effects could be cushioned by exporters absorbing part of the costs, diversifying to new markets, and boosting domestic consumption.
Still, the World Bank has revised down its forecast for Vietnam’s economic growth this year to 6.6 %, from 6.8 % earlier, following the introduction of US tariffs. That projection falls well below the government’s official target of 8.3–8.5 %.
Thai exports forecast to drop 12.7% under US tariffs
Thailand is also facing significant fallout from Washington’s tariff measures, with exports to the United States projected to contract by 12.7 %. The decline stems from heavy reliance on key export sectors, including automobiles, electronics and food products, all of which are now subject to average tariff rates of around 19 %.
Additional pressure is evident in data showing that Thailand’s exports outside the US market also shrank by 1.9 % in August, underscoring the difficulty of finding new destinations to offset lost demand. The country also faces potential scrutiny as a transhipment hub for goods seeking to evade tariffs.
Still, not all Thai products are affected. Roughly 26 % of exports to the US remain exempt from tariffs, particularly certain electronic goods that form a critical part of American supply chains. These exemptions are expected to cushion the overall impact, at least in part.
Two strategies for ASEAN to adapt to US trade war
According to the UNDP, the path forward for ASEAN amid shifting global trade dynamics is not to retreat from globalisation but to adapt with strategic resilience. The agency outlines two key approaches:
1. Outward adaptation: building global competitiveness
ASEAN must diversify beyond its traditional export markets and strengthen regional supply chains to cushion against external shocks. Examples include Malaysia’s bid to position itself as a hub for semiconductors and data centres, and the creation of the Johor–Singapore special economic zone.
Leveraging existing trade agreements is also crucial. The Regional Comprehensive Economic Partnership (RCEP) and the EU’s GSP+ scheme can help unlock new markets and reduce dependence on any single trading partner.
To remain competitive, ASEAN economies need to shift towards higher-value production and adopt advanced technologies, reducing reliance on commodity exports and simple assembly work.
The region should also embrace digital trade and e-commerce as vital channels, enabling micro, small and medium-sized enterprises (MSMEs) to reach global markets at lower cost. Thailand, for instance, has set a target of expanding its e-commerce market to US$60 billion, with the sector growing 19 % last year alone.
2. Strengthening from within: building a stable economic and social foundation
Unlocking domestic markets by addressing regulatory barriers is key to stimulating consumption from a growing middle class. Supporting micro, small, and medium-sized enterprises (MSMEs), the backbone of many ASEAN economies, by providing better access to capital will further drive local economic development.
Investing in upskilling and reskilling the workforce is essential to preparing for new, technology-driven, and environmentally friendly industries. This will ensure that the region’s labour force remains competitive and adaptable in a rapidly evolving global market.
ASEAN builds its own supply chain
A crucial takeaway from the UNDP report is that ASEAN is not just increasing intra-regional trade but is actively creating a robust regional supply chain. Notably, the region is seeing a rise in “forward integration,” where intermediate goods are exported to neighbouring countries to be used in the final manufacturing process.
In 2023, over half of the goods traded within ASEAN were raw materials or components used by neighbouring countries to produce final products, or goods made from materials already sourced from within the region. This is particularly significant in countries like Brunei, Thailand, and Malaysia, where exports of this type account for more than 60 % of total exports.