Asia hit by tariffs: Vietnam, Thailand suffer most, while India, Singapore benefit

President Trump's punitive tariffs affected Asia, particularly Vietnam and smaller textile exporters, by imposing the largest tariffs on those countries. The largest economies in the region, including India, Japan, and South Korea, had more favorable tariff treatment. Overall, there are downside growth and inflation risks which may accelerate easing monetary policy and add downward pressure on currencies.

President Trump announced a 10% blanket tariff on imports from the US, but most APAC countries are receiving an additional 10% or more. The largest tariffs decidedly appear aimed at countries exporting lower-value-added goods, such as footwear, cookware, furniture, garments, and textiles.

Vietnam has the second largest trade deficit with the US after China and is facing a 46% tariff. Other countries have also been hit with substantial tariffs including Cambodia at 49%, Sri Lanka at 44% and Bangladesh at 37% tariffs. The largest economies in the region, including India, Japan, and South Korea, are relatively better off, as their tariffs range more between 24 and 26%. Their important manufacturing sectors are also in the group of countries that can export to the US without making any significant financial contribution, including the pharmaceutical sector and semiconductor industries.

Significant tariffs, particularly on Vietnam and Thailand, will create substantial growth challenges. This is not only about the direct exposure to US imports, but as is demonstrated through exports to the US from other countries, there are also indirect impacts. Below, we stack up the value-add by each Asian country in terms of its exports to the US (direct impact), and then we add to that the value-add by each Asian country in other countries' exports to the US (indirect impact).

Vietnam and Taiwan display the largest overall exposure to US imports -- and they have a significant amount of direct exposure. Semiconductors are excluded from tariffs and should lessen the impact on Taiwan. In fact, aside from semiconductors, substantial growth in Taiwanese exports is highly concentrated in the United States, meaning that the imposed tariffs would slow or dampen that growth (see link).

Vietnam ultimately has an overall exposure of US imports equal to 12% of GDP, meaning the medium term risk against a 46% tariff rate, ceteris paribus and assuming elasticity of demand equals 1, would have a positive GDP impact risk equal to 5.5%. Thailand has an overall exposure equal to 9% of GDP, and even with a lower tariff rate at 36%, in the medium term risks a positive GDP impact equal to 3%.