As the US enters the last campaign week of the 2024 presidential election, scheduled for November 5, global markets are closely monitoring the potential shifts in policies that may impact trade, investment, and geopolitical stability. Southeast Asia, one of the fastest-growing regions globally, is highly sensitive to shifts in US economic and foreign policies.
A critical area of concern for Southeast Asian economies is the possible alteration of U.S.[i]. One of the most immediate concerns for Southeast Asian economies is how US trade policies might shift after the election. Historically, the region has been a key beneficiary of globalization and open trade policies, with countries like Vietnam, Malaysia, and Thailand relying heavily on exports to the US for their economic growth.
A more protectionist US administration could lead to higher tariffs on goods exported from Southeast Asia, particularly in sectors, such as textiles, electronics, and agriculture. These industries are highly sensitive to changes in trade costs, and new tariffs could significantly reduce their competitiveness in the US market. On the other hand, an administration that favors re-engagement in multilateral trade agreements could provide a major boost to the region.
Furthermore, trade liberalization would enable Southeast Asia to diversify its export markets, reducing dependence on the People’s Republic of China and allowing it to play a larger role in global supply chains. ASEAN economies that are part of regional trade frameworks, like the Regional Comprehensive Economic Partnership (RCEP), could see increased integration with the US, resulting in stronger trade flows and improved investment climates[ii].
Strategic balancing for Southeast Asian markets
The U.S.-PRC rivalry has long been a central theme in U.S. foreign policy, impacting Southeast Asia significantly[iii]. For Southeast Asia, the intensifying rivalry between the two superpowers presents both opportunities and risks. Many ASEAN countries share deep economic ties with both the US and PRC, leading them to adopt a delicate balancing act in maintaining these relationships. The geopolitical rivalry between the US and PRC has long influenced Southeast Asia, with many ASEAN nations maintaining intricate economic relationships with both superpowers.
However, the US-PRC rivalry also creates opportunities for Southeast Asian markets. As US companies look to diversify their supply chains away from PRC, countries like Vietnam, Indonesia, and the Philippines stand to gain from increased manufacturing investment. In the geopolitical arena, Southeast Asia could see increased US engagement in regional security issues, particularly in the South China Sea. A US administration focused on strengthening its alliances in the Indo-Pacific may deepen its cooperation with ASEAN members, enhancing regional security and counterbalancing China’s growing influence in the region[iv].
Geopolitical strategy and balancing acts
US foreign policy has been characterized by its strategic relationship with China. For Southeast Asia, the US-China rivalry presents challenges and opportunities. Regional nations have significant economic connections with both superpowers, necessitating a delicate balance in their international relations strategies to maintain positive ties with the US while managing their relationship with China.
The election could result in policy shifts that may require Southeast Asian countries to navigate the delicate balance between the US and PRC. This could disrupt integrated supply chains, especially in technology sectors like semiconductors and electronics, introducing new economic challenges for the region[v].
ASEAN desire for a strong economic pact with the US
Currently, the US plays a significant role in ensuring regional security, particularly through its military alliances and initiatives in the Indo-Pacific. However, the lack of a substantial economic framework has left ASEAN countries looking elsewhere—especially towards PRC, which has offered extensive economic support through initiatives like the Belt and Road Initiative (BRI). Without significant concessions from the US, such as more favourable trade terms or reduced barriers to ASEAN exports, the region has limited incentives to commit to US-backed initiatives in areas like labour reforms and environmental regulations.
For ASEAN nations, such reforms are politically sensitive and often require economic benefits in return. Without a meaningful economic package from the US, these countries may continue to hedge their bets, seeking trade agreements that benefit them both from the West and through closer economic ties with the People Republic of China.
Moreover, ASEAN’s focus is not solely on security; countries like Vietnam, Malaysia, and Indonesia are keen to strengthen their manufacturing sectors and integrate more deeply into global supply chains. This goal is hampered by the absence of US trade agreements that would grant them better access to American markets, which are essential for long-term economic stability. For businesses operating in Southeast Asia, staying ahead of these developments and adapting to new US policies will be key to maintaining growth in a rapidly changing world[vi].
Citations
[i] https://www.thailand-business-news.com/china/168806-the-u-s-election-2024-impact-on-southeast-asia
[ii] https://www.aseanbriefing.com/news/the-us-election-2024-impact-on-southeast-asia-markets/
[iii] https://www.thailand-business-news.com/china/168806-the-u-s-election-2024-impact-on-southeast-asia
[iv] https://www.aseanbriefing.com/news/the-us-election-2024-impact-on-southeast-asia-markets/
[v] https://www.thailand-business-news.com/united-states/169418-the-impact-of-the-2024-us-presidential-election-on-southeast-asias-markets
[vi] https://www.aseanbriefing.com/news/the-us-election-2024-impact-on-southeast-asia-markets/
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