With Donald Trump’s return to the White House on January 20, 2025, the “America First” policy will once again take center stage.  

This policy, which emphasizes reshoring jobs, reducing trade deficits, and tightening immigration policies, holds significant implications for emerging economies. Here, we examine the anticipated impacts of Trump’s economic policies on the Southeast Asian economy (grouped as ASEAN), particularly since ASEAN has become an alternative source of imports and a potential destination for investment relocation amid escalating US-China trade tensions. We focus on four key areas: tariffs and trade deficits, the Generalized System of Preferences (GSP), global supply chain reorientation, and foreign direct investment (FDI). 

First, Tariffs and Trade Deficits 

During his previous term, Trump aggressively employed tariffs to reduce the US trade deficit, specifically targeting imports from China. In his second term, he has signaled intentions to impose tariffs as high as 60 percent on Chinese imports, with potential tariffs of 10–20 percent on imports from other countries (and up to 200 percent on electric vehicles, particularly from China and Mexico).

ASEAN stands as the fourth-largest trading partner of the US, following Mexico, Canada, and China. The region exports a range of goods to the US, including electronic components, apparel, footwear, and tires, while importing products such as electrical machinery, petroleum oils, soybeans, and aircraft. In 2023, ASEAN’s exports to the US were valued at $269.8 billion, primarily comprising raw materials and assembled goods for US production. 

If tariffs on ASEAN goods increase, the cost of these imports would rise, making them more expensive for US producers and consumers and potentially reducing US manufacturing competitiveness and adding to inflationary pressures. 

Second, the Generalized System of Preferences (GSP) 

The GSP program, established in 1976, allows selected goods from developing countries duty-free access to the US market, giving ASEAN countries a competitive advantage. In 2023, ASEAN exports worth $11.7 billion benefited from GSP status, covering 4,867 products (based on HS 6-digit tariff lines), including travel goods, electrical parts, organic chemicals, mattresses, plywood, and tires. ASEAN beneficiaries currently include Cambodia, Myanmar, Indonesia, the Philippines, and Thailand, while Malaysia has been excluded from the program since 1998. 

During Trump's first term in 2017, his administration removed countries like India and Turkey from GSP eligibility, citing trade imbalances and other concerns. At the same time, among ASEAN countries, Thailand and Indonesia were subject to GSP eligibility reviews and were asked to expand market access for US goods and services (note for us: this request contradicted Article 5 of the 1979 Tokyo Agreement, which prohibits developed countries from demanding market access from GSP recipient countries). 

Should Trump re-evaluate Thailand’s and Indonesia’s GSP status, a suspension or termination could increase costs for US companies reliant on ASEAN exports. Since nearly 60 percent of ASEAN’s GSP exports come from Thailand and Indonesia, losing GSP benefits could reduce ASEAN’s overall exports to the US. 

It’s worth noting that many of these ASEAN exports are essential inputs for US production and exports; thus, a GSP termination would likely raise U.S. domestic prices (inflation) and erode US export competitiveness. 

Third, Global Supply Chain Reorientation 

Another major focus of Trump’s economic strategy will be to encourage US companies to reshore manufacturing, thereby reducing reliance on foreign suppliers. This shift could decrease demand for ASEAN’s manufacturing output, particularly in electronics, textiles, and automotive industries, impacting production and exports. However, ASEAN could benefit from a “China Plus One” strategy, where firms retain part of their operations in China but relocate other parts to nearby countries. 

With competitive labor costs, a large domestic market, and a strategic position, ASEAN remains an attractive manufacturing hub, albeit with some infrastructure and regulatory challenges. The escalation of US-China trade tensions -- now extending into technology, strategic industries, and national security -- will have significant implications for Southeast Asia, which is deeply integrated into East Asian supply chains. 

Given ASEAN's role in supplying inputs and intermediate goods for broader production networks in textiles, semiconductors, telecommunications, electrical equipment, machinery, computers, and automotive industries, the region could face reduced demand if reshoring leads to a drop in production and export requirements in these networks. 

Fourth, Foreign Direct Investment (FDI) 

During Trump’s first term, he implemented tax cuts and regulatory incentives to encourage American companies to invest domestically. Should he adopt similar policies in his second term, US FDI flows to ASEAN may decline. In 2023, US FDI into ASEAN totaled $74.36 billion, accounting for 32.35 percent of total FDI inflows and making the US ASEAN’s largest FDI source. US investments in the region have been primarily concentrated in finance (including banking and insurance), professional and technical services, manufacturing, information and communication, and real estate. 

There are concerns that Trump’s tax policies could further discourage US FDI abroad by incentivizing American companies to reinvest earnings domestically. This shift could significantly impact ASEAN industries that rely on partnerships with US capital, technology, and expertise, particularly in finance, energy, mining, and pharmaceuticals. 

In conclusion, a second Trump administration presents both challenges and potential opportunities for the ASEAN economy. The potential for increased tariffs, a GSP review, and a push toward US supply chain reshoring could disrupt trade relations, reduce investment, and require ASEAN to adapt diplomatically and economically. 

To mitigate these risks, ASEAN could focus on diversifying its economic partnerships, strengthening local manufacturing, and expanding trade ties with other major economies to reduce dependency on any single market. Additionally, ASEAN might adopt a direct business-to-business approach to attract US investment while exploring new FDI sources. This could include increased investment from the EU, China, Hong Kong, Japan, South Korea, Taiwan, and the Middle East to offset any potential declines from the US. By enhancing regional cooperation and establishing a more robust economic presence, ASEAN would be better positioned to withstand shifts in US economic policy, ensuring stability and continued growth in an increasingly multipolar world.

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Lili Yan Ing is the Secretary General of the International Economic Association (IEA). Yessi Vadila is the Trade Specialist at the Economic Research Institute for ASEAN and East Asia (ERIA).

The views expressed in this article are those of the authors.