From tariffs to trade transformation: How Asian economies are adapting

Since the US announced its “Liberation Day” tariffs in April 2025, countries have raced to secure lower tariffs on their exports to the US. Between April and now, many have looked to negotiate deals to reduce US tariffs, frequently trading non-tariff, investment or regulatory concessions to do so.

In the same period, boardrooms have scrambled to model costs, reroute supply chains, seek new suppliers, and hedge their exposures. US trade policy has continued to whipsaw decision-makers. While volatility has eased, a 10% baseline tariff on US-bound imports appears to be the new normal. As such, there are fewer daily shocks in trade policy now, but there remain ongoing concerns that the next change is just round the corner, stymying investment decisions.

Looking at the broader economic picture, the OECD now predicts global growth of 3.2% for 2025, an increase from its earlier 2.9% forecast.¹ Despite stronger-than-expected growth amidst tariff challenges, the OECD warns of potential risks, including further tariffs increases, fiscal instability, inflation, and volatile cryptocurrency markets.

Closer home, developing Asia is expected to see stronger growth. The Asian Development Bank forecasts 4.8% growth in 2025 and 4.5% in 2026—down marginally from April 2025 forecasts, but still healthy.²

Although Asia remains the bright spot for growth, the higher tariff baseline is having implications on businesses’ investment and operational decisions. For company CFOs and treasurers, this new normal calls for sharper trade finance and currency risk management. Companies need to map their tariff exposures, structure supply chain financing and hedge against rate and FX volatility as the global trading system continues to adjust to the new reality.

Trade that looks different

The unsettled trading environment is reinforcing the importance of bilateral and minilateral trading partnerships to hedge against tariff shocks and secure preferential access.

In late October, four ASEAN countries signed trade deals with the US at the ASEAN Summit in Kuala Lumpur, that will see the US maintain a tariff of 19% on Malaysia, Thai and Cambodian exports, and 20% on Vietnamese exports.

The nature of these deals agreed with the four countries illustrates how trade is changing. The deals aren’t restricted to blanket tariff rates, but involve a series of gives-and-takes. In addition to doing away with tariffs on key US exports (as in the case of Malaysia and Thailand), the deal with Vietnam will see the removal of the barriers to entry for US agricultural products, for instance.

In the deals with Malaysia and Thailand, the US has sought to secure critical minerals supply chains, given uncertainty over supply from China.

These deals demonstrate ASEAN economies’ adaptability. Moreover, besides negotiating with the US, ASEAN economies are also proactively tapping opportunities in new markets, while trying to strengthen intra-regional trade.

ASEAN’s relationship with China is important in this context. The two economies continue to take steps to deepen their bilateral relationship. Two-way trade between the two increased from US$507.3 billion to US$823.2 billion between 2019 and 2024.³ This number is set to increase further through the ASEAN China Free Trade Agreement (ACFTA) 3.0, an upgrade of their FTA.

Looking further afield, the bloc held its first ever summit with China and the six-member Gulf Cooperation Council (GCC), at which all parties committed to deepen economic cooperation and study the feasibility of an FTA.

Minilateralism is not new in Asia, but is becoming one of the defining features of the new trade order emerging from the tariff shock. It affords countries—with shared goals or common interests—greater flexibility in addressing economic issues.

Three existing examples in the region include the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Indo-Pacific Economic Framework (IPEF).⁴ As these agreements broaden in scope and deepen in sophistication, they will reduce dependence on specific partners.⁵

Companies are having to respond to changing trade policies as well. Asia remains the world’s growth engine, but the contours of trade and investment are being redrawn.

“Asia continues to be a dynamic region for investors looking to diversify their portfolios, and businesses looking to expand strategically,” said Ang Teck Wee, Managing Director, Head of Institutional Banking Group Strategic Business Development, at DBS Bank. “A growing number of trade pacts and an increased focus on boosting intra-regional trade mean there is an expanding set of opportunities, particularly in manufacturing, logistics and digital infrastructure.”

Case study:

To weather disruptions in today’s global trade environment, there are four key objectives that businesses should focus on to build resilience:

Liquidity in the right currency;
Healthy financial fundamentals;
Tax efficiency; and
Trade compliance.

As one of Southeast Asia’s largest banks, DBS Bank has played a role in supporting its partners through challenging economic times. With trade headwinds blowing, DBS can bring its wealth of FDI experience and expertise to support companies that want to take advantage of what the region has to offer.

In one case, the Bank was engaged by a Chinese manufacturer with plans to expand its production into Vietnam, while utilising Singapore as a base for US-bound trade. The strategy faced significant issues given the complexities and uncertainties emanating from geopolitical tensions and changing tariff systems.

DBS FDI provided support by providing advisory services, leveraging on its established regional footprint and deep network of partners. An audit firm helped ensure the manufacturer’s compliance with trade regulations, such as transfer pricing rules, ESG disclosures and proper duty documentation. The firm also offered support in adjusting pricing strategies to manage tariff impacts.

An under-appreciated element of navigating cross-border trade is how businesses manage their tax structures across countries. With the help of audit experts, the manufacturer gained insight into available tax incentives in Vietnam and Singapore, and how to optimise its financials to maintain profits even in the face of a market riddled with uncertainty and volatility.

How DBS FDI can help

Supported by a broad ecosystem of partners from government, business associations and professional services firms, DBS has the expertise required to help companies establish and operate in a new market.

Our end-to-end support enables clients to understand the nuances of local business environments as they seek to expand into new markets—these include tax regimes, regulations, manpower dynamics, operational costs, incentives and even cultural norms.

DBS offers its One-Bank suite of solutions encompassing cash management, financing, foreign exchange hedging, private fund raisings and acquisition advisory to enable clients to grow throughout the region, sustainably and efficiently.

Together with our ecosystem partners, DBS Bank helps new companies navigate the complexities of tariffs and trade, and build new avenues of growth.

To learn more on how DBS Bank can support your expansion into Southeast Asia, please click here.