Investors should ‘take a step back’ to spot opportunities for Asean amid Trump tariffs: JPMorgan

EVEN as US President Donald Trump stirs up the market with a barrage of executive orders, JPMorgan’s chief market strategist for the Asia-Pacific Tai Hui believes there is no need for investors to panic and get too “whipsawed” by his policy announcements.

“If we take a step back and look at what’s enveloping this whole discussion on tariffs, it is about the global supply chain and how the US wants to shore up its own manufacturing, or at least diversify so that it is not exposed to one particular exporter,” he said.

“The overall direction of the new administration… still offers a lot of long-term investment opportunities.”

Instead of the uncertainties, investors should focus on broader implications on the global supply chain, as well as diversification strategies, he added.

In Asean, for example, one of the positives is the emergence of countries such as Vietnam, Indonesia and Thailand as alternative hubs for production. 

He highlighted the need for these countries to have adequate infrastructure to support the demand in shipping and transportation, which offers plenty of long-term investment opportunities. 

Besides diversification, Tai also said that the services sector, which is typically more resilient against tariffs, could be a means to hedge these uncertainties.

“Asean tends to be less exposed when it comes to the US trade as well,” said Raisah Rasid, global market strategist at JPMorgan. 

She noted that for countries such as Indonesia, around 80 per cent of revenue is domestic, which puts Asean nations in a “sweet spot”. 

“The question is: In the face of that global goods headwind, what will policymakers in Asean do – especially in terms of fiscal policy – to really support their domestic demand? I think that is going to be critical,” she said.

Ripple effect

Tai noted the magnitude of the impact that a 20 per cent universal tariff and a 60 per cent tariff on China could have on the global economy.

“You’re throwing a gigantic rock into the pool, and that will create a much bigger wave on the broader economy,” he said.

He added that the global supply chain would be able to absorb some of the smaller “waves” – such as through exporters in China, importers in the United States and retailers – to mitigate the impact on consumers.

“But if you’re pushing through a lot of tariffs in a very short space of time, the supply chain cannot absorb that, and that will get passed on to consumers,” he said. 

“And that’s why the new administration has to be quite thoughtful in the scale, the timing and the pacing of the tariffs, so that US consumers don’t get hurt as much.”