Asia Economist, Founder, Asia Decoded

Priyanka Kishore

Asia Economist, Founder

Asia Decoded

Independent, data-centric insights that help you stay on top of Asia's economics and geopolitics.

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Macroeconomics

<ul>
<li>As the US retreats from rules-based trade under Trump 2.0, China and ASEAN’s commitment to an upgraded ASEAN-China FTA (ACFTA 3.0) underscores their support for openness.</li>
<li>While ASEAN’s integration with China has boosted trade and investment, import surges of low-cost products are squeezing ASEAN’s manufacturers and heightening dependence on Chinese capital is raising geopolitical risks.</li>
<li>ACFTA 3.0 could deepen digital and services linkages, but its economic pay-off for ASEAN hinges on technology transfer, local supply-chain integration, and balanced FDI.</li>
</ul>


As the US retreats from rules-based trade under Trump 2.0, China and ASEAN’s commitment to an upgraded ASEAN-China FTA (ACFTA 3.0) underscores their support for openness.
While ASEAN’s integration with China has boosted trade and investment, import surges of low-cost products are squeezing ASEAN’s manufacturers and heightening dependence on Chinese capital is raising geopolitical risks.
ACFTA 3.0 could deepen digital and services linkages, but its economic pay-off for ASEAN hinges on technology transfer, local supply-chain integration, and balanced FDI.


ACFTA 3.0: Greater Integration Likely, but Who Benefits?

<ul>
<li>The exit of Indonesia's veteran Finance Minister, Sri Mulyani Indrawati, marks a turning point in the country's fiscal regime.</li>
<li>With her out of the picture, it is only a matter of time before the government revises the 3% deficit ceiling higher to accommodate Prabowo's large spending plans.</li>
<li>This is a slippery slope and an indiscriminate push for spending, without concomitant tax reforms, could put debt on an unsustainable path.</li>
</ul>


The exit of Indonesia's veteran Finance Minister, Sri Mulyani Indrawati, marks a turning point in the country's fiscal regime.
With her out of the picture, it is only a matter of time before the government revises the 3% deficit ceiling higher to accommodate Prabowo's large spending plans.
This is a slippery slope and an indiscriminate push for spending, without concomitant tax reforms, could put debt on an unsustainable path.


Indonesia : Sri Mulyani's Exit Compounds Fiscal Risks

<ul>
<li>The US’s broadening protectionist arsenal against India creates substantial headwinds for the country’s economic outlook. </li>
<li>The H-1B visa fee hike has limited impact. But it does raise concerns of future curbs on US offshoring, and follows the steep tariffs on India's goods imposed last month.</li>
<li>A tactical truce with the Trump administration would allow India to prioritise its reform agenda with fewer external distractions.</li>
</ul>


The US’s broadening protectionist arsenal against India creates substantial headwinds for the country’s economic outlook. 
The H-1B visa fee hike has limited impact. But it does raise concerns of future curbs on US offshoring, and follows the steep tariffs on India's goods imposed last month.
A tactical truce with the Trump administration would allow India to prioritise its reform agenda with fewer external distractions.


India : The Rising Costs of US Protectionism

<ul>
<li>Trump offers another three weeks of reprieve on reciprocal tariffs with an extension of the deadline to 1 Aug from 9 July</li>
<li>Tariffs remain cumbersome for Asia despite some reductions. Japan and Malaysia see 1ppt increase.</li>
<li>Ongoing development reinforce our core views of a slowdown in H2 and more monetary easing. However, relative forecasts are subject to re-evaluation.</li>
</ul>


Trump offers another three weeks of reprieve on reciprocal tariffs with an extension of the deadline to 1 Aug from 9 July
Tariffs remain cumbersome for Asia despite some reductions. Japan and Malaysia see 1ppt increase.
Ongoing development reinforce our core views of a slowdown in H2 and more monetary easing. However, relative forecasts are subject to re-evaluation.


Tariff Update - Asia Remains in Trump's Crosshairs

<ul>
<li>After a slow start in Q1, ASEAN has benefitted from front-loading of exports and favourable tariff differentials with China in Q2. But the momentum is likely to falter in H2.</li>
<li>With the 9 July deadline for reciprocal tariffs approaching and limited progress in trade talks with the US, tariffs could increase for the region within days.</li>
<li>Even if tariffs remain unchanged, exports and growth will likely slow as businesses and consumers adjust to higher costs and inventory restocking in the US gives way to declining demand.</li>
</ul>


After a slow start in Q1, ASEAN has benefitted from front-loading of exports and favourable tariff differentials with China in Q2. But the momentum is likely to falter in H2.
With the 9 July deadline for reciprocal tariffs approaching and limited progress in trade talks with the US, tariffs could increase for the region within days.
Even if tariffs remain unchanged, exports and growth will likely slow as businesses and consumers adjust to higher costs and inventory restocking in the US gives way to declining demand.


Chartbook - ASEAN's Tariff Advantage Is Unlikely to Sustain