Asean+3 growth defies expectations but trade war risks still ‘high’, AMRO says
News Summary
The ASEAN+3 group of countries achieved solid economic growth in the first half of 2025, but unpredictable policy shifts from the United States could still send tremors through the region this year, according to the ASEAN+3 Macroeconomic Research Office (AMRO). AMRO's latest quarterly update projects the group's growth (comprising the 10 ASEAN members plus China, Japan, and South Korea) to reach 4.1% in 2025. While this is an upward revision from the 3.8% AMRO projected in July, it still marks a slight decrease from the 4.3% recorded in 2024. AMRO chief economist Dong He stated that major economies have performed reasonably well despite trade policy headwinds, but cautioned against complacency due to high trade policy uncertainties. He noted that while front-loaded shipments boosted external demand, exports could decline if tariffs lead to higher prices. The U.S. has imposed tariffs ranging from 15% to 40% on various ASEAN+3 members, including Indonesia, Malaysia, Cambodia, the Philippines, Thailand, Vietnam, Brunei, Laos, Myanmar, Japan, and South Korea.
Background
The ASEAN+3 mechanism is a regional cooperation framework involving the ten ASEAN member states, China, Japan, and South Korea, aimed at promoting regional economic integration and financial stability. The ASEAN+3 Macroeconomic Research Office (AMRO) is an independent regional macroeconomic surveillance unit under this mechanism, responsible for assessing regional economic conditions and providing policy recommendations. Currently, the U.S. administration, led by President Donald J. Trump, pursues an "America First" trade policy, frequently employing tariffs as a negotiation tool. The 15% to 40% tariffs mentioned in the article reflect this protectionist inclination, posing ongoing challenges to global supply chains and export-oriented Asian economies.
In-Depth AI Insights
What deeper strategic concerns does AMRO's warning about trade policy uncertainties reveal, despite the upward growth revision? The upward revision of the ASEAN+3 growth forecast primarily reflects short-term resilience and a "front-loaded shipment" effect, rather than fundamental long-term structural improvements. AMRO's warning suggests several deeper strategic concerns: - Unpredictability in Supply Chain Restructuring: The uncertainty surrounding tariff policies makes it difficult for businesses to make long-term investment decisions and optimize supply chains, potentially leading to inefficiencies and increased costs within the region. - Vulnerability of Regional Growth Engines: Despite some support from domestic demand, the region's structural reliance on external demand, particularly exports to the U.S., makes it susceptible to external policy shocks, indicating that the growth foundation is not entirely robust. - Limitations of Policy Tools: Internal monetary or fiscal policies within the region may struggle to fully offset the negative impacts of external trade policies, highlighting the challenges of macroeconomic management in the face of geopolitical risks. How might the Trump administration's tariff strategy specifically impact investment flows and supply chain restructuring within the ASEAN+3 region? The Trump administration's tariff strategy is both prompting and accelerating shifts in investment flows and supply chain restructuring within the ASEAN+3 region, with multi-faceted impacts: - Acceleration of the "China+1" Strategy: Tariffs incentivize multinational corporations to relocate parts of their production lines from China to other ASEAN countries to circumvent duties. This boosts FDI into nations like Vietnam, Thailand, and Malaysia, but also places pressure on their labor markets and infrastructure. - Potential Rise of Intra-Regional Trade and Investment Barriers: While aimed at the U.S., the tariffs could lead to protectionist measures among regional countries vying for FDI, potentially even sparking internal trade frictions and undermining regional integration efforts. - Limited Shift in High-Value and Tech Industries: Tariffs primarily affect labor-intensive and low-to-mid-end manufacturing. The relocation of high-tech, high-value-added industries is constrained by factors such as labor skills, R&D capabilities, and intellectual property protection, making large-scale shifts difficult in the short term, thus keeping certain industries highly concentrated. Beyond direct tariff impacts, what subtle, long-term shifts in regional economic alignment could emerge from this prolonged trade friction? Prolonged trade friction extends beyond direct economic impacts, potentially triggering profound shifts in regional economic alignment: - Strengthening of Regional Trade Blocs: To counter external uncertainties, ASEAN+3 countries may further deepen regional trade arrangements like the Regional Comprehensive Economic Partnership (RCEP), forming tighter economic alliances to reduce reliance on single markets. - Emergence of Digital Trade and Services: As goods trade faces disruptions, regional economies might accelerate the development of digital economies and cross-border service trade to find new growth drivers and trade models, thereby reshaping global trade structures. - Adjustment of Geoeconomic Power Balance: In the long term, if the U.S. persists with its protectionist policies, it could prompt Asian economies to seek more diversified trade partners and investment sources, such as strengthening ties with the EU, Africa, or Latin America, thus altering the global geoeconomic center of gravity.