Proposed tariff hike poses stiff challenge to ASEAN

US President-elect Donald Trump's plan to impose punitive tariffs poses a stiff challenge to Southeast Asia's economic outlook, as the region banks on exports to sustain growth. However, demographic dividends, the establishment of new economic zones and investment-friendly policies can mitigate risk, a regional forum heard.

Dennis Fok, head of ETF portfolio management for the Hong Kong-based Mirae Asset Global Investments, said despite concerns over the Trump administration's proposed tariff hike, many US-based companies are "very positive about the business climate" in the member states of the Association of Southeast Asian Nations.

Fok is one of the panelists in the ASEAN-Hong Kong forum organized on Thursday by the Kuala Lumpur-based Maybank, one of the biggest lenders in ASEAN.

The US is the world's biggest importer, and Trump's tariff plan has raised concerns among the world's export-dependent economies including ASEAN.

Chua Hak Bin, regional co-head for macro research at Maybank Securities Singapore, said that Vietnam, which has an over $100 billion trade surplus with the US, may be hit by Trump's tariff plan. But Chua noted that "ASEAN has so far avoided direct mention by Trump, which could be seen as a positive".

Chua said that Trump's plan to impose 25 percent tariffs against products imported from Mexico and Canada could spike inflation in the US and lead to supply chain shifts that may potentially benefit ASEAN.

Despite a potential fallout from Trump's tariff plan, analysts in the Maybank forum also see other growth opportunities in the region.

Safwan Nizar Johari, acting director of the Malaysian Investment Development Authority, or MIDA, Guangzhou Office, said, "This is the best time" to invest in Malaysia. He said the Malaysian government is promoting investment through policies such as a new industrial plan focusing on sectors like semiconductors and renewable energy and the creation of the Johor-Singapore Special Economic Zone, or JS-SEZ, in the southwestern Malaysian state of Johor to facilitate investment.

Fok of Mirae Asset Global Investments said that ASEAN has received over $200 billion in foreign direct investment annually in the past few years, with the US and China among the biggest investors.

"We see the foreign direct investment flowing into the manufacturing sector. That will continue," he stated.

According to the latest investment report published in October by the ASEAN Secretariat and the United Nations Trade and Development, ASEAN has remained "a resilient and attractive destination" for FDIs, with inflows reaching a record $230 billion in 2023.

Fok highlighted the region's large population of more than 670 million and noted that despite the aging global population, ASEAN's working population is expected to grow until 2030, offering a demographic dividend to the region and making it more attractive to investors.

He emphasized the importance of moving up the value chain, citing that major nickel exporters Indonesia and the Philippines have a key role to play in the global production of batteries and electric vehicles. Fok said these two ASEAN countries can partner with countries like China and the US to enhance manufacturing efficiency through AI, which could be crucial for industry advancement.