ASEAN+3 Economies: Resilience in the Face of Trade Turmoil and Protectionism

The ASEAN+3 Macroeconomic Research Office (AMRO) recently unveiled its flagship report, the ASEAN+3 Regional Economic Outlook (AREO) 2025. This critical document sheds light on the region's capacity to endure and navigate the complexities of unprecedented global trade challenges, particularly those stemming from the recent tariff announcements by the US.

Overview of the ASEAN+3 Economic Landscape

On April 2, 2025, the US government made a significant move, introducing sweeping tariff measures that have sent ripples through global trade. The announcement has created a climate of uncertainty, surpassing market anticipations, and adding intricate layers to the economic scenarios faced by the ASEAN+3 region, which comprises ten ASEAN nations along with China, Japan, and South Korea.

AMRO's Chief Economist, Hoe Ee Khor, emphasized that the announcement of elevated tariffs has complicated the macroeconomic outlook for the ASEAN+3 countries. However, he noted that these economies have undergone substantial transformation over the years, equipping them with greater resilience and diversification than observed during previous global economic shocks.

The Impact of US Tariffs on ASEAN+3

A staggering 13 out of the 14 member economies are under the influence of hefty tariffs introduced in the recent US policy move, with an estimated average effective rate of 26%. Such measures threaten to disrupt trade momentum, strain supply chains, and exacerbate financial market volatility. The precarious situation invites further scrutiny, as the evolving tariff landscape is expected to produce a fluctuating economic environment.

Despite these challenges, AMRO previously projected a growth rate exceeding 4% for the region in 2025 and 2026, driven by robust domestic demand and recovering investments. However, in light of the recent developments, there is concern that growth rates could slip below this threshold, potentially reaching as low as 3.4% in 2026 under current scenarios.

Resilience and Policy Responses

In facing these tumultuous times, the ASEAN+3 economies enter this new phase from a position of relative strength. Governments across the region maintain the fiscal capacity necessary for targeted support to the most vulnerable sectors, ensuring that domestic demand remains robust.

Central banks also have ample room to implement measures aimed at sustaining financial stability, as they hold well-anchored low inflation rates. The priority now is to utilize available policy space effectively to alleviate any impending near-term shocks.

A Shift Towards Diversification and Domestic Demand

The trade relationship dynamics are shifting, with the share of exports destined for the US declining from 24% in 2000 to just 15% today. This gradual diversification reflects a broader trend of increasing domestic demand and deepening intraregional trade, which lessens the region's reliance on any single export market.

Efforts towards regional economic integration have further strengthened ASEAN+3's capability to withstand global market turbulence, and there remains optimism that continued growth is achievable. AMRO advocates for the region to enhance structural reforms aimed at improving productivity, investing in renewable energy, and fostering digital transformation.

Long-Term Strategies for Sustainable Growth

As the region braces for the near-term risks, it must not lose sight of its long-term development goals. AMRO Group Head Allen Ng insists that reinvigorating structural reforms and digitalizing the economy are imperative for tapping into the region's latent growth potential. Priorities will include enhancing industrial capacities, strengthening institutional frameworks, and optimizing investment strategies across various sectors.

Despite uncertainty, the ASEAN+3 region has demonstrated remarkable adaptability. As stated by Khor, "There are no victors in a trade war, but through unity and coordinated action, we can collectively emerge stronger." This sentiment encapsulates the resilience and determination of the ASEAN+3 nations as they navigate the complexities of a volatile economic landscape.

For further insights, the full AREO 2025 report is accessible on the AMRO website.