At the start of his second term, US President Donald Trump has started implementing new tariffs on various goods, targeting issues like national security and reliance on imports. The US is the world’s largest buyer of goods and services, spending $4.1 trillion in 2024 alone, far more than China’s $2.6 trillion. Because of this, any policy change in US trade can send ripples through the global economy.
When tariffs are introduced, they raise the price of imported goods. This can make locally produced goods more attractive but can also increase costs for companies that rely on foreign materials. As a result, businesses may pass those higher costs on to consumers, leading to inflation, a general rise in prices.
For example, Trump’s tariffs included a 25% tax on imported steel and aluminium. This has made it more expensive for US companies that use these metals, like car manufacturers or construction firms, to make their products. Higher costs can reduce profits for these businesses, potentially leading to lower stock prices and job cuts.
Investors often react quickly to big economic changes. The fear of higher prices due to tariffs led to a sell-off in bonds (loans that governments and companies issue to raise money), as investors worried about inflation. At the same time, the US dollar became stronger, while currencies in some Asian countries, such as India and Malaysia, weakened.
This shows how trade policies can affect financial markets worldwide. Countries that heavily rely on exporting goods to the US are especially vulnerable to tariffs.
While Trump initially talked about extreme tariffs, such as a 60% tariff on Chinese imports, the final measures were not as aggressive. Instead, the tariffs targeted specific industries, and some planned tariffs were delayed. This suggests that while tensions between the US and China remain high, there hasn’t been a complete breakdown in trade between the two countries.
Not all countries lose when tariffs are imposed. Some nations can actually benefit by stepping in to supply goods that are now harder to import from certain places.
Vietnam has become a major player in global trade. When the US started imposing tariffs on China during Trump’s first term, Vietnam gained market share by increasing its exports to the US between 2017 and 2023. It wasn’t just a matter of Chinese goods being rerouted through Vietnam, the country made real progress by improving its manufacturing capabilities and trade connections.
Vietnam has strong trade relationships with major economies like the US, China, Japan, and the European Union. It has also been attracting foreign direct investment (FDI), money invested by companies or individuals from other countries. Many global brands, including Samsung and Apple, have increased their manufacturing presence in Vietnam due to its business-friendly policies and skilled workforce.
Malaysia and Singapore have also benefited from the shift in trade dynamics. Malaysia has focused on developing high-tech industries, including semiconductors (a critical component in electronics) and data centres. Meanwhile, Singapore has strengthened its role as a financial hub and a home for multinational company headquarters. The two countries have even teamed up to create a special economic zone to boost investment and job creation in strategic industries.
As a result, ASEAN (a group of 10 Southeast Asian nations, including Vietnam, Malaysia, and Singapore) is now the largest recipient of foreign investment in Asia.
Trump’s tariffs have reshaped global trade, creating winners and losers. While they have increased uncertainty and caused short-term market fluctuations, they have also opened doors for emerging economies like Vietnam, Malaysia, and India to gain a larger role in global trade.
For retail investors, this means there are opportunities to invest in companies and regions that are benefiting from these shifts. However, it’s essential to stay informed about policy changes and economic trends. Diversifying your portfolio, investing in different industries and countries, can help manage risks and take advantage of new growth areas.
While trade wars and tariffs might seem like complex global issues, they have real-world impacts on investments. Understanding these shifts can help everyday investors make smarter decisions in a rapidly changing economic landscape.
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
