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As Donald Trump prepares for his second term, the implications of his proposed tariffs are reverberating across the globe, particularly in Southeast Asia and South Korea. On February 1, 2025, Trump imposed a 25% tariff on imports from Canada and Mexico, alongside a 10% tariff on Chinese goods, which analysts warn could slow global trade and impact ASEAN's export-dependent economies [4165b3ba]. Economists suggest that Malaysia could see a boost in its exports due to trade diversion resulting from these tariffs on China. BIMB Securities analyst Maliana Shaharuddin indicates that multinational corporations may reroute their trade through Malaysia, positioning the country as a potential re-export hub [f82dc7b6].
However, this potential growth comes with significant risks. A slowdown in China's economy could dampen demand for Malaysia's electrical and electronics (E&E) products, which are crucial to its export landscape. In 2024, China was Malaysia's third-largest export market, contributing 12.4% to total exports valued at RM1.51 trillion [f82dc7b6]. The forecast for Malaysia's exports in 2025 is cautiously optimistic, with BIMB projecting a 3.9% growth and a revival of re-exports at 5.7%, alongside a 4.5% growth in imports [f82dc7b6].
In South Korea, concerns are mounting over the potential collapse of the manufacturing ecosystem due to the tariff war initiated by the Trump administration. Lee Si-wook, president of the Institute for International Economic Policy, warns that ongoing tariff threats on Canada and Mexico may lead to key industrial production bases relocating to the U.S. Increased U.S. investment by Korean companies could weaken the domestic labor division, as South Korea's investment in the U.S. surged from $7.05 billion in 2015 to $27.77 billion in 2022, with manufacturing investment rising from $2.36 billion in 2020 to $8.03 billion in 2022 [552c21c6].
Dr. Yeah Kim Leng has noted that the overall impact on Malaysia's economy will be slight to moderate unless China's growth is significantly halved, reflecting the interconnectedness of the regional economies [f82dc7b6]. Meanwhile, UOB's Julia Goh maintains a similar export growth projection of 4.5% for 2025, while OCBC's Lavanya Venkateswaran expects continued foreign direct investment (FDI) inflows from China into ASEAN, supporting a 4.5% GDP growth forecast for the same year [f82dc7b6].
In South Korea, Lee Keun, chair professor at Seoul National University, notes that tariffs are inducing U.S. investment, which risks Korea's domestic production. Heo Jeong from Sogang University highlights the transfer of core technologies to the U.S. as a significant concern. In response, Deputy Prime Minister Choi Sang-mok is preparing countermeasures to mitigate negative impacts on the economy, including emergency export measures and support for companies affected by U.S. tariffs [552c21c6].
China has already filed a complaint with the World Trade Organization (WTO) and plans to impose tariffs on select U.S. products in retaliation. Analysts Michael Ricafort and Wan Suhaimie Wan Mohd Saidie have cautioned against the risks of retaliatory trade wars and currency volatility, emphasizing that ASEAN's deep integration with China means a slowdown in Chinese manufacturing could adversely affect ASEAN exports, which constitute about 60% of the region's GDP [4165b3ba]. As Malaysia and South Korea navigate these changes, the potential for increased exports and investment must be balanced against the risks posed by a slowing Chinese economy and the shifting manufacturing landscape, highlighting the delicate interplay of global trade dynamics in the wake of Trump's policies.