At the beginning of 2025, US President Donald Trump invoked the International Emergency Economic Powers Act (IEEPA), imposing a broad “reciprocal” tariff regime on all trade partners (also called the Liberation Day tariffs). This sent new shockwaves in global supply chains, particularly those stemming from the APAC base. This piece explores the dynamics of this policy decision as it applies to the APAC region, how it is shaping the strategy of multinationals, and potential future developments.
Summary of Events
The executive order signed on April 2, 2025, established a two-tiered tariff system. The first level was a blanket 10% duty on all imports, effective April 5. The second level, initiated on April 9, introduced steeper, individualized “reciprocal” tariffs targeting countries with significant trade surpluses with the US, including China, South Korea, Vietnam, India, and Taiwan - nations integral to the global technology and manufacturing supply chain. The reciprocal system tariff rates were steep. China faced the largest cumulative duties: a 54% effective rate. Vietnam and India incurred rates above 40%, while South Korea and Taiwan incurred comparable surcharges in the 25-35% range. These nations have a pivotal position in the manufacturing of consumer electronics, semiconductors, and assembled hardware; these industries, which are among the most productive and important to the contemporary social, economic, and technological system, are extremely vulnerable to cost motion and policy risk.
While most reciprocal tariffs were paused for 90 days on April 9 following market turbulence, the pause did not apply to China. Instead, tariffs on Chinese imports were intensified, culminating in a combined rate of 145% by early May 2025. In retaliation, China imposed tariffs of up to 125% on US goods, accompanied by additional regulatory control. The US also eliminated the de minimis exemption for low-value imports from China and Hong Kong, subjecting even small shipments to these elevated tariffs. These measures have significantly disrupted global trade flows, with the average effective US tariff rate reaching 28%, the highest since 1901.
The Trump administration justified these new policies on grounds of long-time grievances regarding trade deficits, outsourcing of American factory jobs, and national economic security. The White House claimed the tariff deal would level the playing field for American producers and reduce reliance on foreign supply chains that had “hollowed out” domestic industry. In particular, the executive order emphasized the need to reduce dependence on what it called “strategic adversaries”, referring to both China's control of electronics and rare earths, and more general anxieties about foreign control of critical infrastructure.
The tariffs created spillover effects well beyond the US-China relationship. To emerging APAC economies like Vietnam and India, which had been long considered “safe havens” for “China plus one” manufacturing strategies, imposition of tariffs was a stark reminder of how quickly political winds might blow in a different direction. Many companies that had begun partially shifting Chinese business to Vietnam in the late 2010s and early 2020s found themselves caught now in a broader geopolitical restructuring.
Moreover, the design of the policy – broad and reactive – introduces an added layer of uncertainty. Unlike previous tariffs applied to individual industries (like steel or solar panels), the 2025 tariffs are broad. They strike a wide range of goods, from raw materials to finished electronics, with no industry exceptions. This is forcing firms to rapidly evaluate alternative sources, revisit existing contracts, and in some cases, transfer costs to consumers. Although the government argued that this change in policy would benefit domestic production, the immediate consequences display dislocation and inflationary impact. The process of building new factories for US production, particularly of sophisticated goods like smartphones or chips, is both time- and capital-intensive.
The market reaction was swift and spasmodic. US and Asian stock markets fell sharply in the days following the tariff announcement, as investors reacted to fears of retaliation, supply chain disruptions, and rising costs. On April 3, 2025, the S&P 500 dropped 4.88% - a loss of over 274 points, marking the second-largest single-day point decline in its history - followed by a further 5.97% drop the next day, bringing the two-day decline to over 10%. The Nasdaq and Dow Jones also posted steep losses. Asian markets mirrored this turmoil: Japan’s Nikkei 225 plummeted nearly 8%, triggering a trading halt; Hong Kong’s Hang Seng Index fell 13.2%, its worst single day drop since 1997; and Taiwan’s Taiex slid 9.7%, entering bear market territory. These sharp sell-offs highlighted the fragility of global markets in the face of escalating trade tensions. Multinationals with synchronized businesses in APAC, including automaker, tech, and pharmaceutical firms, were quick to assess exposure and revise estimates. Of these, perhaps none were as directly affected as Apple Inc., whose overwhelming reliance both on Chinese assembly and components and on US consumption, make it a high-profile victim of the risks of a highly globalized production network.
The executive order signed on April 2, 2025, established a two-tiered tariff system. The first level was a blanket 10% duty on all imports, effective April 5. The second level, initiated on April 9, introduced steeper, individualized “reciprocal” tariffs targeting countries with significant trade surpluses with the US, including China, South Korea, Vietnam, India, and Taiwan - nations integral to the global technology and manufacturing supply chain. The reciprocal system tariff rates were steep. China faced the largest cumulative duties: a 54% effective rate. Vietnam and India incurred rates above 40%, while South Korea and Taiwan incurred comparable surcharges in the 25-35% range. These nations have a pivotal position in the manufacturing of consumer electronics, semiconductors, and assembled hardware; these industries, which are among the most productive and important to the contemporary social, economic, and technological system, are extremely vulnerable to cost motion and policy risk.
While most reciprocal tariffs were paused for 90 days on April 9 following market turbulence, the pause did not apply to China. Instead, tariffs on Chinese imports were intensified, culminating in a combined rate of 145% by early May 2025. In retaliation, China imposed tariffs of up to 125% on US goods, accompanied by additional regulatory control. The US also eliminated the de minimis exemption for low-value imports from China and Hong Kong, subjecting even small shipments to these elevated tariffs. These measures have significantly disrupted global trade flows, with the average effective US tariff rate reaching 28%, the highest since 1901.
The Trump administration justified these new policies on grounds of long-time grievances regarding trade deficits, outsourcing of American factory jobs, and national economic security. The White House claimed the tariff deal would level the playing field for American producers and reduce reliance on foreign supply chains that had “hollowed out” domestic industry. In particular, the executive order emphasized the need to reduce dependence on what it called “strategic adversaries”, referring to both China's control of electronics and rare earths, and more general anxieties about foreign control of critical infrastructure.
The tariffs created spillover effects well beyond the US-China relationship. To emerging APAC economies like Vietnam and India, which had been long considered “safe havens” for “China plus one” manufacturing strategies, imposition of tariffs was a stark reminder of how quickly political winds might blow in a different direction. Many companies that had begun partially shifting Chinese business to Vietnam in the late 2010s and early 2020s found themselves caught now in a broader geopolitical restructuring.
Moreover, the design of the policy – broad and reactive – introduces an added layer of uncertainty. Unlike previous tariffs applied to individual industries (like steel or solar panels), the 2025 tariffs are broad. They strike a wide range of goods, from raw materials to finished electronics, with no industry exceptions. This is forcing firms to rapidly evaluate alternative sources, revisit existing contracts, and in some cases, transfer costs to consumers. Although the government argued that this change in policy would benefit domestic production, the immediate consequences display dislocation and inflationary impact. The process of building new factories for US production, particularly of sophisticated goods like smartphones or chips, is both time- and capital-intensive.
The market reaction was swift and spasmodic. US and Asian stock markets fell sharply in the days following the tariff announcement, as investors reacted to fears of retaliation, supply chain disruptions, and rising costs. On April 3, 2025, the S&P 500 dropped 4.88% - a loss of over 274 points, marking the second-largest single-day point decline in its history - followed by a further 5.97% drop the next day, bringing the two-day decline to over 10%. The Nasdaq and Dow Jones also posted steep losses. Asian markets mirrored this turmoil: Japan’s Nikkei 225 plummeted nearly 8%, triggering a trading halt; Hong Kong’s Hang Seng Index fell 13.2%, its worst single day drop since 1997; and Taiwan’s Taiex slid 9.7%, entering bear market territory. These sharp sell-offs highlighted the fragility of global markets in the face of escalating trade tensions. Multinationals with synchronized businesses in APAC, including automaker, tech, and pharmaceutical firms, were quick to assess exposure and revise estimates. Of these, perhaps none were as directly affected as Apple Inc., whose overwhelming reliance both on Chinese assembly and components and on US consumption, make it a high-profile victim of the risks of a highly globalized production network.
Performance of S&P 500, Nikkei 225 and Hang Seng (3M)
Response to Policy: Apple Case
The new wave of US tariffs introduced in early 2025 has forced many multinational companies to seriously rethink their supply chain strategy. Apple reacted quickly; after years of testing small-scale production in India, the company decided to move faster. Before the new tariffs, Apple was already pressured to diversify its supply base as a longer-term initiative to mitigate geopolitical risk. The 2025 tariffs imposed a sharp level of urgency for these endeavours. Since China finished final assembly of over 90% of iPhones and other key products, a tariff on imports of 54% would have had a significant impact on Apple’s prices, margins, and competitive position in the US market, its most profitable geography. While some product lines were temporarily exempted through negotiations with the US Trade Representative’s office, the broader message to industry was unmistakable: dependence on China or other high-surplus APAC countries now represented an important source of policy and financial risk.
Since the beginning of 2025, final assembly of iPhones in India has been scaled up in significant way. Apple’s commitment to source the majority of US bound iPhones from India and Vietnam by Q2 2025 exemplifies the industry’s broader pivot; this move aims to shield end product pricing and maintain sales momentum despite an anticipated $900 million in tariff related costs for the quarter. Foxconn and Pegatron, two of Apple’s main manufacturing partners, have increased investments in Tamil Nadu and Karnataka. New hiring rounds have been launched and more local suppliers are involved. Now around 25% of global iPhone production is happening in India. It is not a complete exit from China, but clearly a structural adjustment. India is not a perfect substitute; there are infrastructure issues and the logistic system is still catching up. Customs can be slow and procedures not always predictable. The labor market is big and generally cost-efficient, but in some areas, specific technical training is still lacking. Despite that, for Apple and many others, the benefits of diversifying now outweigh the risks and costs.
Across all sectors, companies are changing how they define efficiency. For decades, efficiency meant low cost, fast delivery and high-volume centralization. Now, resilience has also become a part of the equation, as the vulnerability of supply chains to geopolitical risk becomes more evident. Companies want to be able to absorb shocks. They are looking at dual sourcing, regional production hubs and smarter logistics. The phrase “China plus one” has moved from theory to practice. For Apple, it’s China plus India. For others, it’s China plus Mexico, or Vietnam, or multiple small-scale facilities spread across regions.
The new wave of US tariffs introduced in early 2025 has forced many multinational companies to seriously rethink their supply chain strategy. Apple reacted quickly; after years of testing small-scale production in India, the company decided to move faster. Before the new tariffs, Apple was already pressured to diversify its supply base as a longer-term initiative to mitigate geopolitical risk. The 2025 tariffs imposed a sharp level of urgency for these endeavours. Since China finished final assembly of over 90% of iPhones and other key products, a tariff on imports of 54% would have had a significant impact on Apple’s prices, margins, and competitive position in the US market, its most profitable geography. While some product lines were temporarily exempted through negotiations with the US Trade Representative’s office, the broader message to industry was unmistakable: dependence on China or other high-surplus APAC countries now represented an important source of policy and financial risk.
Since the beginning of 2025, final assembly of iPhones in India has been scaled up in significant way. Apple’s commitment to source the majority of US bound iPhones from India and Vietnam by Q2 2025 exemplifies the industry’s broader pivot; this move aims to shield end product pricing and maintain sales momentum despite an anticipated $900 million in tariff related costs for the quarter. Foxconn and Pegatron, two of Apple’s main manufacturing partners, have increased investments in Tamil Nadu and Karnataka. New hiring rounds have been launched and more local suppliers are involved. Now around 25% of global iPhone production is happening in India. It is not a complete exit from China, but clearly a structural adjustment. India is not a perfect substitute; there are infrastructure issues and the logistic system is still catching up. Customs can be slow and procedures not always predictable. The labor market is big and generally cost-efficient, but in some areas, specific technical training is still lacking. Despite that, for Apple and many others, the benefits of diversifying now outweigh the risks and costs.
Across all sectors, companies are changing how they define efficiency. For decades, efficiency meant low cost, fast delivery and high-volume centralization. Now, resilience has also become a part of the equation, as the vulnerability of supply chains to geopolitical risk becomes more evident. Companies want to be able to absorb shocks. They are looking at dual sourcing, regional production hubs and smarter logistics. The phrase “China plus one” has moved from theory to practice. For Apple, it’s China plus India. For others, it’s China plus Mexico, or Vietnam, or multiple small-scale facilities spread across regions.
Broader Effects of Tariffs on the APAC Region
The short-term impact of the tariff policy was evident on major manufacturing hubs within the region. Following the imposition of the tariff, Purchasing Managers’ Index (PMI) data indicated that major economies slowed down: Japan’s PMI dipped below 50 points for the first time since the end of 2023, and comparable drops were witnessed within South Korea. Factory orders within the APAC zone decreased for the first time in more than a year, reflecting decreasing demand from the US. Meanwhile, supply chain issues picked up as firms delayed investment and cut production targets based on continuing trading uncertainty rather than an imminent switch in policy.
The short-term impact of the tariff policy was evident on major manufacturing hubs within the region. Following the imposition of the tariff, Purchasing Managers’ Index (PMI) data indicated that major economies slowed down: Japan’s PMI dipped below 50 points for the first time since the end of 2023, and comparable drops were witnessed within South Korea. Factory orders within the APAC zone decreased for the first time in more than a year, reflecting decreasing demand from the US. Meanwhile, supply chain issues picked up as firms delayed investment and cut production targets based on continuing trading uncertainty rather than an imminent switch in policy.
Performance of PMI
Exporters were at a higher cost as they were faced with the option of either absorbing the higher cost or charging others as tariffs increased. The exports of APAC, which accounted for approximately 15% of the exports of the area, had an increase in costs of 20% to 35%. PwC noted that tariffs imposed on producers of high-value products such as electronics, auto components and agricultural produce resulted in massive profit loss. It prompted producers to renegotiate prices and alter the terms of the contract. In other instances, producers partnered with American distributors to divide the cost of the tariffs so that they were able to stay competitive. Smaller companies were not able to do so.
Multinationals are becoming increasingly concerned about tariffs and relocating production closer to home in APAC. The manufacturing previously primarily in China is now going to other nations with lower announced rates of tariffs, such as Vietnam (46%), Thailand (37%), and Malaysia (24%). While certain countries in Southeast Asia have the same or higher tariffs than China, the nations are assisting US entrepreneurs who are looking to diversify supply chains, as Chatham House reports. For these requirements, governments are developing infrastructure, setting up special economic zones, and providing tax concessions to attract production shifted from China. The reconfiguration of production landscapes has also impacted foreign direct investment (FDI). Economies in the APAC region, reported Euromonitor, are set to redirect FDI into ASEAN markets as companies aim to mitigate tariff risks and create more efficient market access.
Essentially, the new tariff regime has served to accelerate existing trends. Over the past few years, tech giants have quietly but decisively started moving parts of their manufacturing out of China - not just to dodge tariffs, but to protect themselves from the growing uncertainty in global politics and supply chains. Google, for instance, is now assembling more of its Pixel phones and smart home devices in Malaysia and Vietnam, and it’s gearing up to build the Pixel 8 in India. Microsoft is rekindling ties with suppliers in Vietnam and Indonesia, even putting $1.7 billion into cloud and AI infrastructure in the region. Amazon has started making its Echo and Kindle devices in India and northern Mexico, bringing production closer to key markets. And Samsung, perhaps more than anyone, has gone all in on Vietnam, where it now makes around 60% of its phones and has invested over $18 billion. These aren’t just tactical moves - they’re long-term bets on stability and flexibility; putting all your eggs in one basket just isn’t an option anymore.
Semiconductors remain one of the most sensitive and crucial sectors. US firms like Intel, Qualcomm and Nvidia are pushing to reduce dependence from Chinese-based suppliers. TSMC’s new plant in Arizona is now viewed not only as a symbolic move, but as a necessity, while Samsung is continuing its expansion in Texas. Geographic diversification, resource and time-intensive as it may be, has become a necessity for this industry.
Outside the tech sector, the situation is more diversified. Tesla has started sourcing more of its battery components from South Korea and is evaluating options to move parts of its final assembly to Mexico. LG and Panasonic are expanding their US-based operations, both for internal market and export. A number of smaller appliance brands, traditionally reliant on Chinese suppliers, are now moving part of their tooling and operations to countries like Poland, Thailand and Turkey. Automobile manufacturers are seeking new assembly facilities in Thailand to evade excessive steel and aluminum taxes. Meanwhile, growers selling New Zealand and Australian products faced increased taxes on valuable products. It resulted in delays in stock, reduced export volumes, and domestic price fluctuations that made products less affordable for consumers in both domestic and international markets.
As anticipated, financial markets promptly responded to the increased risk of trading. The key APAC stock markets were down by around 1.5%, and the Malaysian and Indonesian currencies decreased approximately 2% against the USD as funds quit the markets and new growth expectations shifted. Leading Japanese trading houses, such as Mitsui, Sumitomo, and Sojitz, revised their profit expectations downwards and budgeted billions of dollars to contend with the adverse impact of trade issues, as reported by Reuters. The Bank of Japan maintained its monetary policy unchanged but revised downwards its FY2026 GDP growth expectation to a subdued 0.5%, citing risks in external trade among the risks in its key projections. Recent market shifts indicated that investors were concerned about the growth model of the region, which is export-dependent, so investors shifted funds to domestic consumption and shares of service companies as hedges against external problems.
Multinationals are becoming increasingly concerned about tariffs and relocating production closer to home in APAC. The manufacturing previously primarily in China is now going to other nations with lower announced rates of tariffs, such as Vietnam (46%), Thailand (37%), and Malaysia (24%). While certain countries in Southeast Asia have the same or higher tariffs than China, the nations are assisting US entrepreneurs who are looking to diversify supply chains, as Chatham House reports. For these requirements, governments are developing infrastructure, setting up special economic zones, and providing tax concessions to attract production shifted from China. The reconfiguration of production landscapes has also impacted foreign direct investment (FDI). Economies in the APAC region, reported Euromonitor, are set to redirect FDI into ASEAN markets as companies aim to mitigate tariff risks and create more efficient market access.
Essentially, the new tariff regime has served to accelerate existing trends. Over the past few years, tech giants have quietly but decisively started moving parts of their manufacturing out of China - not just to dodge tariffs, but to protect themselves from the growing uncertainty in global politics and supply chains. Google, for instance, is now assembling more of its Pixel phones and smart home devices in Malaysia and Vietnam, and it’s gearing up to build the Pixel 8 in India. Microsoft is rekindling ties with suppliers in Vietnam and Indonesia, even putting $1.7 billion into cloud and AI infrastructure in the region. Amazon has started making its Echo and Kindle devices in India and northern Mexico, bringing production closer to key markets. And Samsung, perhaps more than anyone, has gone all in on Vietnam, where it now makes around 60% of its phones and has invested over $18 billion. These aren’t just tactical moves - they’re long-term bets on stability and flexibility; putting all your eggs in one basket just isn’t an option anymore.
Semiconductors remain one of the most sensitive and crucial sectors. US firms like Intel, Qualcomm and Nvidia are pushing to reduce dependence from Chinese-based suppliers. TSMC’s new plant in Arizona is now viewed not only as a symbolic move, but as a necessity, while Samsung is continuing its expansion in Texas. Geographic diversification, resource and time-intensive as it may be, has become a necessity for this industry.
Outside the tech sector, the situation is more diversified. Tesla has started sourcing more of its battery components from South Korea and is evaluating options to move parts of its final assembly to Mexico. LG and Panasonic are expanding their US-based operations, both for internal market and export. A number of smaller appliance brands, traditionally reliant on Chinese suppliers, are now moving part of their tooling and operations to countries like Poland, Thailand and Turkey. Automobile manufacturers are seeking new assembly facilities in Thailand to evade excessive steel and aluminum taxes. Meanwhile, growers selling New Zealand and Australian products faced increased taxes on valuable products. It resulted in delays in stock, reduced export volumes, and domestic price fluctuations that made products less affordable for consumers in both domestic and international markets.
As anticipated, financial markets promptly responded to the increased risk of trading. The key APAC stock markets were down by around 1.5%, and the Malaysian and Indonesian currencies decreased approximately 2% against the USD as funds quit the markets and new growth expectations shifted. Leading Japanese trading houses, such as Mitsui, Sumitomo, and Sojitz, revised their profit expectations downwards and budgeted billions of dollars to contend with the adverse impact of trade issues, as reported by Reuters. The Bank of Japan maintained its monetary policy unchanged but revised downwards its FY2026 GDP growth expectation to a subdued 0.5%, citing risks in external trade among the risks in its key projections. Recent market shifts indicated that investors were concerned about the growth model of the region, which is export-dependent, so investors shifted funds to domestic consumption and shares of service companies as hedges against external problems.
Immediate Market Reaction to Tariff Announcement
The extended tariffs pose the risk of reducing global GDP by 1%, disproportionately affecting APAC economies. The most exposed are lower-income nations such as Cambodia, Laos, and Myanmar because of high export-to-GDP rates and low fiscal buffers. Yet, the crisis can stimulate growth through supply chain diversification, regional integration, and green manufacturing investment. Automation and Industry 4.0 trends such as robotics and artificial intelligence logistics can compensate for increasing labor rates and keep the manufacturing lead for APAC. Structural reforms are to play a key role in the global economic position of the APAC after tariffs.
Business and governments are aiming to minimize systemic risks. Regional groupings favored the Regional Comprehensive Economic Partnership for an APAC free trade zone. Countries flocked to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to diversify exports. Business groups are lobbying for US trade agreements to provide tariff protection, and private entities are looking to Europe, Latin America, and Africa to diversify risk from the United States. Government agencies accelerated digital business and logistics movements, aware that customs inefficiencies would compound tariffs.
Business and governments are aiming to minimize systemic risks. Regional groupings favored the Regional Comprehensive Economic Partnership for an APAC free trade zone. Countries flocked to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to diversify exports. Business groups are lobbying for US trade agreements to provide tariff protection, and private entities are looking to Europe, Latin America, and Africa to diversify risk from the United States. Government agencies accelerated digital business and logistics movements, aware that customs inefficiencies would compound tariffs.
Future Outlook
China still enjoys a competitive advantage in capital-intensive manufacturing, yet labor-intensive production processes such as textiles and low-end assembly of electronics are already moving to other APAC countries. “China plus one” or “China plus two” initiatives, where companies move part of their production capacity to another country for risk reduction, are a trend that will gain speed. The outcome may be a cleaner divide of US-focused supply chains that minimize the Chinese content. “It’s hard to replicate the efficiency and scale economies of existing supply chains, so it may happen on a product-by-product basis instead of a country-by-country basis”, says Frederic Neumann, HSBC’s co-head Asia economist. India is thus one of the biggest beneficiaries of the ongoing global supply chain reconfiguration. The country is quickly becoming a new manufacturing hub with its growing workforce, better infrastructure, and competitive industrial incentives such as the Production Linked Incentive (PLI) scheme. Rather than rushing to bring production back home, Apple doubled down on south-east Asia and India. “[Apple’s] immediate strategy to deal with the tariff war shows how far away an iPhone ‘Made in America’ is”, writes Nikkei Asia.
This fits into the overall trend: Indian electronics exports will be over $120 billion by 2026 from $24 billion in 2022. In addition, the strategic partnership between the US and India is further strengthened by the countries’ shared fears over China’s economic policies. India’s rise as a manufacturing and technology hub is being driven by a mixture of domestic policy shifts and international demand for new sources of supply, particularly to China.
Vietnam has been a winner, particularly in the electronics sector. However, Vietnam’s dependence on the US market, accounting for almost 30% of its exports, exposes the country to significant risks to tariffs and accusations of currency manipulation, which could have a strongly detrimental effect on the export-oriented economy.
Malaysia has also seen growth in high-tech sectors such as semiconductor packaging and medical devices, facing similar threats as Vietnam. Already, the imposition of the 24% tariff rate from July onwards would slim the chances to meet its economic growth forecast (4.5% to 5.5%) this year. To avert a potential economic slump, Malaysia has expressed its willingness to engage in negotiations with the United States on non-tariff barriers, work toward reducing its trade surplus with the US, and explore the possibility of a bilateral trade agreement.
With its rich reserves of key minerals for EV batteries, Indonesia is positioning itself as a major player in the global supply chain. But as Indonesia deepens its economic ties with both the US and China, it must play a risky game between two major economic powers.
In response to general post-tariff uncertainty, regionalization will likely accelerate. Companies will increasingly rely on regional hubs for production, with countries in APAC leveraging their competitive advantages to maintain supply chain stability. Countries such as Singapore, South Korea and Japan will play a key role in developing advanced supply chain infrastructures, using AI, digital twins and blockchain technologies to monitor and optimize logistics in real time.
As the APAC region diversifies its supply chains, the role of technology and digital infrastructure will become even more important. Smart ports, transparent customs systems and AI-driven analytics will enable businesses to navigate the complex geopolitical landscape and ensure supply chains remain agile in the face of potential disruption.
Under the Trump administration, the economic future of the APAC region is set to be characterized by fragmentation and geopolitical competition. The remaking of global supply chains is no longer a question of post-trade war recovery, but rather one of adaptation to a new global order in which regional powers have an increasing part to play. As the US pulls back from multilateral agreements, increasing protectionism, APAC nations are forced to recalculate and reevaluate. The winners will be those that reduce geopolitical risk, insert digital technologies into supply chains and build resilience through diversification and alliances. The global map of supply chains is being redrawn, and APAC countries must act quickly to stake their claim in this new world.
China still enjoys a competitive advantage in capital-intensive manufacturing, yet labor-intensive production processes such as textiles and low-end assembly of electronics are already moving to other APAC countries. “China plus one” or “China plus two” initiatives, where companies move part of their production capacity to another country for risk reduction, are a trend that will gain speed. The outcome may be a cleaner divide of US-focused supply chains that minimize the Chinese content. “It’s hard to replicate the efficiency and scale economies of existing supply chains, so it may happen on a product-by-product basis instead of a country-by-country basis”, says Frederic Neumann, HSBC’s co-head Asia economist. India is thus one of the biggest beneficiaries of the ongoing global supply chain reconfiguration. The country is quickly becoming a new manufacturing hub with its growing workforce, better infrastructure, and competitive industrial incentives such as the Production Linked Incentive (PLI) scheme. Rather than rushing to bring production back home, Apple doubled down on south-east Asia and India. “[Apple’s] immediate strategy to deal with the tariff war shows how far away an iPhone ‘Made in America’ is”, writes Nikkei Asia.
This fits into the overall trend: Indian electronics exports will be over $120 billion by 2026 from $24 billion in 2022. In addition, the strategic partnership between the US and India is further strengthened by the countries’ shared fears over China’s economic policies. India’s rise as a manufacturing and technology hub is being driven by a mixture of domestic policy shifts and international demand for new sources of supply, particularly to China.
Vietnam has been a winner, particularly in the electronics sector. However, Vietnam’s dependence on the US market, accounting for almost 30% of its exports, exposes the country to significant risks to tariffs and accusations of currency manipulation, which could have a strongly detrimental effect on the export-oriented economy.
Malaysia has also seen growth in high-tech sectors such as semiconductor packaging and medical devices, facing similar threats as Vietnam. Already, the imposition of the 24% tariff rate from July onwards would slim the chances to meet its economic growth forecast (4.5% to 5.5%) this year. To avert a potential economic slump, Malaysia has expressed its willingness to engage in negotiations with the United States on non-tariff barriers, work toward reducing its trade surplus with the US, and explore the possibility of a bilateral trade agreement.
With its rich reserves of key minerals for EV batteries, Indonesia is positioning itself as a major player in the global supply chain. But as Indonesia deepens its economic ties with both the US and China, it must play a risky game between two major economic powers.
In response to general post-tariff uncertainty, regionalization will likely accelerate. Companies will increasingly rely on regional hubs for production, with countries in APAC leveraging their competitive advantages to maintain supply chain stability. Countries such as Singapore, South Korea and Japan will play a key role in developing advanced supply chain infrastructures, using AI, digital twins and blockchain technologies to monitor and optimize logistics in real time.
As the APAC region diversifies its supply chains, the role of technology and digital infrastructure will become even more important. Smart ports, transparent customs systems and AI-driven analytics will enable businesses to navigate the complex geopolitical landscape and ensure supply chains remain agile in the face of potential disruption.
Under the Trump administration, the economic future of the APAC region is set to be characterized by fragmentation and geopolitical competition. The remaking of global supply chains is no longer a question of post-trade war recovery, but rather one of adaptation to a new global order in which regional powers have an increasing part to play. As the US pulls back from multilateral agreements, increasing protectionism, APAC nations are forced to recalculate and reevaluate. The winners will be those that reduce geopolitical risk, insert digital technologies into supply chains and build resilience through diversification and alliances. The global map of supply chains is being redrawn, and APAC countries must act quickly to stake their claim in this new world.
Conclusion
Apple’s shift to India, stepping away from its overreliance on Chinese production is part of a larger pattern. The 2025 tariffs did not invent this trend, but they forced it to mature. It is not a short-term reaction, but a strategic decision in response to a new global trade environment where certainty is becoming rare. The next years will not be about cost savings alone; they will be about how fast companies can adapt to disruption. Supply chains are no longer only operational backbones, but strategic assets. Those who treat them as such will be better positioned for what comes next.
This is not the end of globalization. But it may be the end of how globalization used to work.
Apple’s shift to India, stepping away from its overreliance on Chinese production is part of a larger pattern. The 2025 tariffs did not invent this trend, but they forced it to mature. It is not a short-term reaction, but a strategic decision in response to a new global trade environment where certainty is becoming rare. The next years will not be about cost savings alone; they will be about how fast companies can adapt to disruption. Supply chains are no longer only operational backbones, but strategic assets. Those who treat them as such will be better positioned for what comes next.
This is not the end of globalization. But it may be the end of how globalization used to work.
By Thomas Agosti, Francesco Bianchi, Davide Franchini, and Jennifer Povolotskaya
SOURCES
- Reuters
- Bloomberg
- PwC
- Chatham House
- Euromonitor International
- Nikkei Asia
- Financial Times
- IMF
- Peterson Institute for International Economics
- East Asia Forum
- ISPI
- HSBC
- Washington Post
- The Diplomat