Trade Turbulence (Part 10): How does the U.S. tariff reset shape winners and losers in the APAC region?

The global trade architecture has undergone a seismic shift in recent days with the implementation of a new U.S. tariff regime. A legal battle between the U.S. Supreme Court (SCOTUS) and the White House has produced a paradoxical outcome: lower average costs of doing business with the U.S. for the bulk of Asian economies.

For Asian investors, the immediate challenge is understanding the transition from the Trump administration's "reciprocal" tariffs under the International Emergency Economic Powers Act (IEEPA) to a new flat-rate surcharge under Section 122 of the Trade Act of 1974. While headlines focus on the executive-judicial clash, the reality for Asian exporters is a modest compression of tariff spreads. The punitive market-specific IEEPA tariffs have been repealed with the implementation of the temporary new 10% global import tariff. Many questions remain around the Section 122 tariffs:

• When will the tariff rate be raised to 15%? 
• How and when will IEEPA tariff revenue be refunded?
• Will there be potential exemptions for some goods, such as select pharmaceutical and electronic products? 

More broadly, this changes have created near-term winners and losers across the Asia-Pacific region.

From IEEPA to Section 122: A net benefit for Asia?

Before the SCOTUS ruling, the effective tariff rate stood at approximately 15.9%, driven largely by U.S. President Trump's use of IEEPA to penalize markets with large trade surpluses, a category dominated by Asian manufacturing hubs. The Supreme Court's 6-3 decision striking down these tariffs as executive overreach momentarily dropped the average rate to 8.3%¹. Thereafter, the administration swiftly invoked Section 122 to impose a blanket 10% surcharge for the next 150 days.

Following this move, the average tariff rate on goods entering the U.S. is 12.0% (Exhibit 1). While elevated by historical standards, this still represents a 3.9 percentage-point reduction from the pre-SCOTUS ruling. Should the global tariff rate increase to 15%, it will still be a 2.1 percentage-point reduction from previously.

For Asia, this distinction matters. IEEPA tariffs were targeted mechanisms addressing bilateral trade imbalances, and Asian economies, running some of the largest U.S. trade surpluses, bore the brunt. The shift to Section 122 applies a flatter penalty, offering tariff relief to some key Asian exporters.

Winners and losers in the APAC region

The previous regime featured vast spreads between the highest- and lowest-taxed import sources. That gap has now narrowed modestly.

China faced steep tariffs introduced by IEEPA (33.5%) but should see effective tariff rates decline under the new regime, despite remaining subject to substantial Section 301 and Section 232 duties covering some U.S. imports. Critically, the introduction of blanket tariffs on other exporters narrows the tariff rate differential, making China relatively more competitive in the U.S. market and restoring some price competitiveness. This could boost near-term export momentum, potentially triggering front-loading.

India also benefits from the removal of IEEPA tariffs. With an interim U.S.-India trade deal announced but still under negotiation, SCOTUS's elimination of IEEPA authority strengthens India's bargaining position by removing the threat of punitive tariffs. This provides Indian negotiators with greater leverage as detailed discussions continue.

ASEAN manufacturing hubs such as Vietnam and Thailand should see effective tariff rates decline. This amplifies Vietnam's strong 2025 export performance and solidifies its role as a critical manufacturing hub within global supply chains serving the U.S. market, widening its competitive advantage regionally and internationally.

Advanced economies, like Singapore, previously faced below-average tariffs but should see modest increases as tariffs rise to the 10% baseline. However, the Singaporean government has opened applications for its Business Adaptation Grant, which helps small businesses address supply-chain vulnerabilities and reconfigure operations to alleviate tariff burdens.

South Korea and Taiwan present a mixed picture. They faced manageable IEEPA surcharges initially, but the uniform 10% Section 122 rate would increase their trade-weighted tariff burden compared with previous preferential treatment. However, both economies have secured substantial strategic investment agreements with the U.S. in exchange for favorable market access. With strategic sectors such as semiconductors remaining exempt and non-stacking rules continue to apply to Section 232 products, South Korea and Taiwan’s competitive positions remain largely unchanged.

Investment implications

The tariff landscape requires careful navigation: Section 122 tariffs carry a 150-day duration, while the administration's increasing reliance on Section 301 and other trade remedies will create more sector-specific and economy-specific ramifications which require ongoing monitoring.

Even in the face of external shocks, with "Liberation Day" as the peak event last year, the Asian export cycle remains intact, further evident in the manufacturing purchasing managers index (PMI) being in expansionary territory. As tariffs will likely remain over the medium term, investors should, however, take an active approach when it comes to Asian equities, weighing the winners and losers from evolving trade policies. While Singapore, Taiwan, and Korea will see their effective tariff rates increase, the impact should be offset by government measures and a tech cycle that remains very much intact. For investors seeking income amid what will arguably be a volatile year, Asian equities continue to present an attractive opportunity to diversify portfolios that may otherwise be rather concentrated in U.S. mega-caps.

¹Data from Global Trade Alert.

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