Southeast Asian countries are cushioning tariff impact with targeted stimulus

Southeast Asian countries are responding to rising U.S. tariffs and global trade pressures with large-scale stimulus packages aimed at sustaining growth, protecting key industries, and boosting long-term competitiveness. Governments are channeling funds into infrastructure, consumer support, and soft loans for businesses, while also easing monetary policy and accelerating public investment. For businesses, this means new opportunities in government-backed sectors and a shift toward more localized and resilient supply chains.

Vietnam: Vietnam is rolling out a range of measures to cushion its economy from the impact of rising U.S. tariffs and global trade headwinds. A central initiative is a 500 trillion VND (~$20 billion) low-interest loan package involving 21 banks, aimed at boosting infrastructure and technology development, with a minimum 1% interest rate discount over at least two years. This program focuses on long-term projects in transportation, AI, and semiconductors, though concerns remain about implementation criteria and bank liquidity constraints. The government is also accelerating public investment disbursement, seeking to unlock $235 billion worth of delayed projects due to legal hurdles.

Domestically, policies have been launched to strengthen consumer confidence in Vietnamese goods, promoting national brands and quality standards to reduce reliance on imports. In parallel, crackdowns on smuggling, counterfeit goods, and illegal transshipments have been ramped up to appease U.S. concerns over origin fraud. Additionally, to stabilize macroeconomic conditions, the Prime Minister ordered tighter controls on the gold market to address price disparities, which affect public trust in the financial system. Collectively, these moves represent a coordinated response to maintain growth momentum while addressing structural weaknesses and enhancing domestic economic resilience.

Thailand: Thailand has enacted a multifaceted response to the anticipated 36% U.S. tariffs, set to take effect after the 90-day tariff pause period ends in July. The government has reallocated 157 billion baht (approx. US$4.7 billion) from its flagship digital wallet stimulus to hard infrastructure, water management, transport, logistics, and soft loans for SMEs. In parallel, it announced a broader US$15 billion stimulus package aimed at boosting long-term competitiveness through strategic investment in infrastructure, energy, digital transformation, and trade facilitation. To cushion short-term shocks, the Ministry of Finance has deployed 100 billion baht in preferential loans through state-owned banks to assist exporters, manufacturers, and suppliers affected by the changing trade landscape.

On the monetary side, the Bank of Thailand lowered policy rates to 1.75%, the lowest in two years, to stimulate liquidity, though officials have signaled limited further easing room. Meanwhile, Bangkok has moved diplomatically to de-escalate tensions: the government submitted a formal trade package to Washington, promising to increase imports of U.S. goods, tighten controls on transshipped Chinese products, and address bilateral trade imbalances.

Indonesia: Indonesia responded to the U.S. tariff threat with a US$1.5 billion fiscal stimulus package launched in early June to stimulate domestic demand. Measures include transportation fare subsidies, toll discounts, wage support for households during the school holidays, and expanded social aid targeting low-income families – designed to buttress consumer spending amid slowing growth. Concurrently, the government is leveraging regulatory tools, such as deregulating import quotas, easing local-content rules, and streamlining trade procedures, to fulfill commitments made in talks with U.S. trade officials. This includes submitting a tariff-preference list ahead of the July negotiation deadline and pledging to increase U.S. imports by up to US$10 billion in sectors like fuel, crude oil, and LPG.

On the financial front, Bank Indonesia delivered its first rate cut in over a year in May, lowering the benchmark rate by 25 basis points to 5.50% to support growth amid rising external headwinds. The central bank also introduced targeted liquidity support through reserve requirement relief for loans directed at priority sectors, aiming to boost credit activity in strategic industries. Simultaneously, the government is accelerating efforts to diversify trade beyond the U.S. market, pursuing FTAs (e.g., with the EU) and strengthening participation in regional frameworks to reduce exposure to geopolitical risks. Structural reforms – ranging from simplifying tax compliance to attract foreign and domestic investment, providing export tax exemptions for key commodities to enhance competitiveness, to the empowerment of Indonesia’s sovereign wealth fund and intensified anti-smuggling campaigns – are underway to fortify domestic industries, enhance self-reliance, and secure long-term economic resilience.

Malaysia:

Since the U.S. tariff announcement, Malaysia has mobilized a mix of fiscal and monetary measures to shield its economy. On 5 May, Prime Minister Anwar Ibrahim unveiled a RM 1.5 billion (US $356 million) SME relief package that combined extra loan guarantees, soft working-capital financing, one-off grants and fast-tracked procurement for small government projects to ease credit constraints and cash-flow pressures for exporters and manufacturers. On 13 May, Malaysia imposed definitive anti-dumping duties on flat-rolled iron and non-alloy steel from China, India, Japan and South Korea, with rates ranging from 4.48 percent to 36.8 percent for five years, in order to protect local steel processors from cheap imports. Meanwhile, Bank Negara Malaysia cut the statutory reserve requirement by 100 basis points to 1.00 percent, effective 16 May, injecting around RM 19 billion of liquidity into the banking system to bolster lending and domestic demand.

Beyond these immediate shock-absorbers, Malaysia is intensifying export diversification to reduce reliance on the U.S. market. The government is deepening market access through ASEAN, RCEP and the CPTPP while advancing negotiations on a future EU Free Trade Agreement. In early April, Malaysia welcomed Chinese President Xi Jinping on a state visit, during which both sides signed 31 sectoral agreements on trade, infrastructure and technology to bolster bilateral ties. On 27 May, Kuala Lumpur hosted the inaugural ASEAN–GCC–China Summit to advance trilateral cooperation with Gulf states and China, exploring new opportunities in energy, halal products and financial services.

Philippines:

The Philippine government’s response to the 17 % U.S. tariff has so far focused on diplomatic engagement with Washington, ongoing impact monitoring by DTI, and exploring policy options, such as an Economic Security Council and potential adjustments to Philippine import tariffs, while reserving the option to introduce targeted relief measures if needed. Meanwhile, the Bangko Sentral ng Pilipinas has delivered tangible support by cutting its policy rate by 25 bps to 5.50% on 10 April 2025 to bolster domestic demand and cushion businesses from external shocks and signalled further gradual cuts pending its 19 June review.

Singapore:

Singapore launched the Singapore Economic Resilience Taskforce (SERT) on 8 April to coordinate relief for firms and workers hit by the new 10 % baseline tariff. On the monetary front, the Monetary Authority of Singapore tweaked the S$NEER policy band by reducing its rate of appreciation, while leaving its centre and width unchanged, to ease cost pressures, and warned that further monetary flexibility remains on the table if external headwinds persist.

Key Budget 2025 measures that took effect in April 2025 also provided relief. Households began receiving Community Development Council and SG60 vouchers, U-Save rebates and enhanced ComCare assistance to ease cost-of-living pressures. Displaced workers could tap the SGUnited Jobs and Skills initiative for training allowances and job-matching support, with up to S$6,000 over six months. Businesses saw their 50 percent corporate-income-tax rebates for Year of Assessment 2025 disbursed from April (capped at S$40,000 with a minimum benefit of S$2,000) to help manage tariff-driven shocks.

Actions to Consider

• Consider localizing more operations in Vietnam, Thailand, and Indonesia to benefit from government-backed loans and incentives in infrastructure, tech, and manufacturing.
• Tap into stimulus-backed financing by partnering with local banks, SMEs, or state programs offering soft loans and investment subsidies.
• Audit your supply chain to ensure clear origin labeling and reduce exposure to transshipment crackdowns and U.S. tariff risks.
• Align with national development priorities such as digital transformation, logistics upgrades, and green energy to stay eligible for future fiscal support and partnerships.
• Increases communication with partners on whether they will benefit from any measures to support either their investment plans, cost of operations or access to credit.