The Impact of Trump’s 25% Tariffs on Steel and Aluminum: How Asia’s Trade Landscape Is Shifting

Introduction

Former U.S. President Donald Trump’s decision to impose a 25% tariff on steel and aluminum imports has sparked concerns across the global economy. While the policy aims to strengthen U.S. manufacturing, it is expected to have significant consequences for Asian exporters, particularly Vietnam, South Korea, China, Japan, and Taiwan.

Businesses in the U.S., Canada, Europe, China, and Australia need to closely monitor these developments, as the evolving trade landscape could present both risks and new investment opportunities. In this article, we analyze the potential impact of these tariffs and how different Asian economies are likely to respond.

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Vietnam: The Most Vulnerable Economy

Vietnam is one of the most exposed countries, with its steel and aluminum exports to the U.S. accounting for 0.3% of its GDP in 2024. Additionally, Vietnam plays a crucial role in processing semi-finished Chinese steel before re-exporting it, making it particularly vulnerable to trade restrictions.

The country’s increasing role in global electronics manufacturing under the “China +1” strategy also puts it at risk. Major U.S. tech companies like Apple, Google, and Intel have been expanding their production in Vietnam, but rising tariffs could disrupt supply chains and increase operational costs.

For further insights into how Vietnam’s tech industry is evolving, check out our article on the impact of global trade policies on electronics manufacturing.

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South Korea: Trade Uncertainty Ahead

South Korea currently enjoys tariff exemptions under an export quota system, but its recent shipments to the U.S. have fallen below the designated threshold. If the U.S. revises these quotas, South Korea’s steel, semiconductor, and automotive industries could face significant challenges.

Despite these risks, ING analysts suggest that South Korea still has negotiating leverage, potentially allowing it to secure favorable trade terms.

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China and ASEAN: Deepening Economic Interdependence

China, already engaged in a trade war with the U.S., faces additional pressure from these new tariffs. Its role as the largest trade partner for ASEAN, accounting for 26% of total imports in 2024 (up from 16% a decade ago), means that any slowdown in China’s economy could ripple across Southeast Asia.

ASEAN’s growing dependence on China exposes nations like Malaysia, Thailand, and Indonesia to greater economic instability if Chinese demand for raw materials and intermediate goods declines.

To learn more about China’s evolving role in global supply chains, read our in-depth analysis on Asia’s shifting trade dynamics.

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Japan and Taiwan: High-Tech Risks

Japan and Taiwan are major players in semiconductors, AI, and high-tech manufacturing, industries that Trump is pushing to repatriate to the U.S.. Any policy changes that reduce reliance on Asian imports could threaten their export-driven economies.

Despite having diversified trade partners, Japan and Taiwan remain highly dependent on U.S. demand for advanced technology. The new tariffs could disrupt their industries, forcing them to seek alternative markets or adapt their production strategies.

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India and the Philippines: Limited Exposure but Potential Risks

India and the Philippines are less vulnerable to the direct impact of steel and aluminum tariffs, as their economies are driven more by domestic consumption than exports.

However, if Trump expands tariffs to services trade, sectors like IT outsourcing and software development—which are vital to both countries—could face significant setbacks.

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Malaysia, Thailand, and Indonesia: A Mixed Outlook

Malaysia and Thailand play crucial roles in global semiconductor and automotive supply chains, providing them with some protection from immediate trade shocks. The increasing diversification of global supply chains away from China has resulted in greater investment in these nations, reducing their overall risk.

Indonesia, on the other hand, could see its electric vehicle (EV) industry suffer if Trump rolls back incentives under the Inflation Reduction Act. Given Indonesia’s heavy investments in EV battery production, a decline in U.S. demand could slow the sector’s growth.

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Electronics: The Most Exposed Industry

The electronics sector is the most vulnerable to these new tariffs. Vietnam’s rising share of U.S. electronics imports, coupled with Malaysia’s critical role in supplying integrated circuits to the U.S. and Mexico, places both countries at significant risk.

According to ING, Asia is not only a key supplier of electronic components to the U.S. and China, but also to Mexico, highlighting the deep interconnection of global supply chains.

For an in-depth look at the future of electronics manufacturing, visit our detailed report on the impact of trade policies on global supply chains.

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Can ASEAN and India Benefit from U.S. Investment?

Despite the challenges posed by these tariffs, ASEAN nations and India may benefit from rising U.S. foreign direct investment (FDI). In 2023, the U.S. accounted for one-third of net FDI inflows into ASEAN, signaling increased confidence in the region’s long-term economic potential.

Major corporations such as Intel, Apple, and Google have been expanding operations in Vietnam, Malaysia, and Thailand, which could help mitigate the negative effects of trade barriers and open doors for future bilateral trade agreements.

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Conclusion: The Global Trade Landscape Is Changing

Trump’s protectionist trade policies are reshaping global markets, with Asia facing the most significant economic disruptions.

Vietnam, South Korea, China, Japan, and Taiwan are at high risk due to their export-driven economies.

India and the Philippines remain less affected but could suffer if tariffs extend to the services sector.

ASEAN nations like Malaysia, Thailand, and Indonesia face moderate risks, with potential advantages from increased U.S. investments.

As global supply chains shift, businesses in the U.S., Canada, Europe, China, and Australia must stay informed and adapt their strategies to navigate these changes effectively.

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