Thailand GDP growth most affected by increased effective tariff rate among Asean-5
It is followed by Vietnam, Malaysia, India, the Philippines and Indonesia from the greatest to least affected, based on an OCBC report
[SINGAPORE] The effective tariff rate on Asean-5 and India exports to the US has risen sharply, with Thailand the most affected, an OCBC report indicated on Tuesday (Aug 19).
The impact on gross domestic product will still be felt despite semiconductor and pharmaceutical exemptions, noted OCBC, adding that the higher effective rates will hurt export growth to the US.
Due to the front-loading of exports largely occurring in the first quarter of 2025, the tariffs will impact growth until the end of 2026, said the report.
Thailand was considered the most exposed to a sharper slowdown on account of “a triple whammy from perceived domestic political risks, structural constraints and exposure” to the US.
From the greatest to the least GDP impact faced, Vietnam, Malaysia, India, the Philippines and Indonesia follow Thailand.
The level of “pain” felt by the Asean-5 countries and India will differ depending on the openness of the economy, the importance of the US as an export market, and the knock-on impact of slower external demand on domestic demand conditions, added the report.
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Cyclical factors, such as the extent of payback from the front-loading of exports, could also exert an influence.
The slower growth in Vietnam and Malaysia in the second half of 2025 will mainly be due to weaker external demand conditions and the front-loading payback, explained the report. This is even as domestic demand conditions remain resilient.
The report noted that the new levies, which went into effect on Aug 7, have effective rates lower than those previously announced on Apr 2 or Jul 9. However, they “remain punitive enough to impact trade and growth prospects”.
Exports from Indonesia, Malaysia, Cambodia, the Philippines and Thailand face a 19 per cent levy, while those from Vietnam are subject to a slightly higher rate of 20 per cent. The Vietnamese rate can rise to 40 per cent if an export is deemed to be a “transhipment”.
Brunei faces a 25 per cent rate, while Laos and Myanmar were hit with the highest rate in South-east Asia, at 40 per cent. The tariff rate for US imports from Singapore remained at 10 per cent, which Prime Minister Lawrence Wong said offers “little comfort”.
India was hit with a prohibitive 50 per cent rate, despite a long charm offensive from Prime Minister Narendra Modi. Reciprocal tariffs on India are currently at 25 per cent, with the remaining 25 per cent levy for reliance on Russian oil imports set to take effect on Aug 27.
“Still, hope is not entirely dim for India, with OCBC stating that the tariffs will likely not derail broader economic growth momentum even as they prove painful in pockets.”
OCBC stated that it expects authorities to “remain nimble in their response”, estimating that they will rely more on monetary than fiscal policies in the near term. Over the medium term, they are expected to build economic resilience through reforms and diversify trading partners.
The bank also added that regional central banks are expected to continue with rate cuts.
It pencilled in a cumulative 50 basis points (bps) in rate cuts from Bank Indonesia and Bangko Sentral ng Pilipinas for the remainder of 2025.
The Bank of Thailand is expected to deliver one more 25 bps cut in 2025, while the State Bank of Vietnam will likely trim its policy rate by a cumulative 50 bps in 2026. The Reserve Bank of India is anticipated to slash its rate by 50 bps in total by March 2026.
India is still hoping to negotiate down the 50 per cent levy, but OCBC reiterated its stance that “trade negotiations with India are unlikely to yield quick outcomes, as were some expectations at the start of 2025”.
Still, hope is not entirely dim for India, with OCBC stating that the tariffs will likely not derail broader economic growth momentum even as they prove painful in pockets.
It added that there is still a lack of clarity around the definition of “transhipments”, the timing and rate of impending tariffs on semiconductors and pharmaceuticals, as well as potential ad hoc tariff changes stemming from the US administration.
OCBC’s calculations also indicated that sector-specific tariffs on copper, steel, aluminium, cars and parts are not significant for the Asean-5 countries, Singapore and India.
The report also pointed out that “tariff calculations are complicated”, and are “usually undertaken at the most granular trade codes available”.
It explained: “The effective tariff rate has been raised significantly – reciprocal tariffs are stacked on top of already applied (most-favoured nation) tariff rates, while the sector-specific tariffs are not stacked and assumed to be stand-alone.”
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