Assessing Southeast Asia's Exposure to U.S. Tariffs and Identifying Resilient Sectors

The 2025 U.S. tariff regime, under President Donald Trump, has reshaped Southeast Asia's economic landscape, imposing duties as high as 49% on Cambodia and 46% on Vietnam. These tariffs, aimed at curbing trade circumvention around Chinese sanctions, have disrupted traditional manufacturing models and forced regional economies to recalibrate their trade strategies. While electronics and automotive sectors face acute vulnerability, emerging sectors like renewable energy, bioeconomy, and high-tech innovation are demonstrating resilience, offering strategic opportunities for investors.

Sectoral Exposure: Electronics and Automotive

Southeast Asia's electronics and automotive industries, long pillars of growth, have been hit hardest. Vietnam, for instance, hosts major operations for Samsung and Apple, contributing $440 billion in exports by 2023. Thailand's “Detroit of Asia” moniker, tied to its 27% GDP contribution from automotive manufacturing, now faces headwinds as U.S. tariffs complicate access to Western markets. The Trump administration's revised tariffs (19–20% for Vietnam and Indonesia) have already triggered canceled orders and factory closures, with ASEAN's GDP growth forecasts slashed by 2025.

The unintended consequence of these tariffs has been a recentering of supply chains around China. Chinese firms are embedding themselves into Southeast Asia's digital infrastructure, offering 5G, cloud, and AI solutions that align with Beijing's strategic priorities. This shift underscores the region's dilemma: balancing U.S. market access with deepening economic ties to China.

Resilient Sectors: Renewable Energy, Bioeconomy, and High-Tech Innovation

Renewable Energy

Southeast Asia's renewable energy sector is emerging as a critical growth driver. Vietnam, once a solar energy leader with 18 GW of capacity by 2023, is now focusing on grid modernization to manage intermittency. Thailand aims for 15.6 GW of solar capacity by 2035, supported by streamlined permitting and tax incentives. Indonesia, leveraging its volcanic resources, targets 26.65 GW of floating solar by 2030.

Government policies, such as Vietnam's 8th Power Development Plan, emphasize low-emission hydrogen and grid flexibility. Meanwhile, the U.S. tariffs on solar imports have spurred domestic adoption, with Southeast Asian countries redirecting export-led output to local markets.

Bioeconomy

Thailand's Bio-Circular-Green (BCG) Economy model is a standout example of bioeconomy innovation, integrating sustainable agriculture and biotechnology. Vietnam's bioeconomy strategy, supported by FAO-BIOTEC collaborations, aims to strengthen public-private partnerships and regional trade frameworks. These initiatives not only address environmental concerns but also create jobs, with the bioeconomy projected to contribute 25–30% of jobs in key markets.

High-Tech Innovation

The high-tech sector is witnessing a surge in FDI, particularly in semiconductors. Vietnam secured $235 billion in FDI in 2024, with national chip strategies and tax incentives attracting firms like Intel. Malaysia's semiconductor hub, contributing 22.3% of GDP, is also expanding, though U.S. tariffs on components like polysilicon have introduced uncertainty. Chinese firms, including BYD and Huawei, are deepening their presence, embedding digital infrastructure aligned with Beijing's techno-sovereignty vision.

Policy Reforms and FDI Reallocation

Southeast Asian governments are recalibrating policies to mitigate tariff risks. Vietnam's 40% reliance on Chinese inputs for manufacturing highlights the tension between securing U.S. tariff reductions and maintaining supply chain competitiveness. Indonesia and the Philippines are diversifying trade partnerships, targeting the EU and China to reduce over-reliance on U.S. markets.

FDI inflows into the region reached $230 billion in 2023, with renewable energy and EVs attracting significant capital. The OECD notes that reforms in services sector productivity and digital infrastructure will be critical to sustaining this momentum.

Strategic Implications for Investors

For investors, the key lies in sectoral reallocation. While electronics and automotive face headwinds, renewable energy and bioeconomy sectors offer long-term resilience. High-tech innovation, though exposed to geopolitical tensions, remains attractive due to regional demand and policy support.

Countries like Vietnam and Thailand exemplify how strategic policy reforms—such as FITs, tax incentives, and BCG models—can drive growth. However, success will depend on navigating U.S.-China rivalry and aligning with global sustainability trends.

In this evolving landscape, Southeast Asia's ability to balance economic pragmatism with strategic autonomy will define its next phase of growth.