We are just hours away from the USA electing its 47th president. All eyes are on whether former president and Republican candidate Donald Trump will return to the White House. Standing in his way is current Democratic Vice President Kamala Harris. Although there are three other candidates for the country’s top posts, they either belong to smaller parties or are independents and are therefore unlikely to stand out in the polls.

There have been many surveys, surveys and comments about who will emerge victorious in this war. After all, the next US commander-in-chief has the power to influence the course of the global economy, including Southeast Asia. There is much at stake as the world economy grapples with uncertainty, volatility, high interest rates and wars on two fronts.

What does the US election outcome mean for Southeast Asia as Trump and Harris are locked in a close fight?

Of the two, Trump is probably the more well-known entity. During his first term, which began eight years ago, he tried to dismantle the multilateral trade regime created by globalization. We are still seeing the effects and consequences of their policies on this issue. This is especially true of its aggressive and combative stance against China and its alleged trade practices. If the United States and China are currently on the path to decoupling from each other’s economies, then Trump has certainly set those wheels in motion in his four years in the Oval office. If elected this week, Trump will likely use his term to grease the wheels of his “America First” policies.

Trump’s Tariff Plans

Already, Trump has threatened to impose a series of high tariffs, or import duties, of 60 percent on all goods coming from China and 20 percent on goods the United States imports from elsewhere. In September, he also threatened to impose 100 percent tariffs on goods produced in Mexico.

First, Southeast Asian countries, which are mostly export-oriented economies, face the risk of reduced exports to the United States due to Trump’s threat of 20 percent tariffs. This is very important. This year, the United States overtook China as Southeast Asia’s largest export market, with 15 percent of the region’s exports going to the United States. Any significant reduction in these exports due to tariffs could hit regional economies hard. Of course, there is a possibility that Trump will not follow through on tariff plans if he is elected. But his engagement with trade deficits and correcting those imbalances is key to his promise of creating more jobs in America. Considering that the region has a trade surplus of approximately $200 billion with the United States, it will be a surprise if Trump does not take steps to reduce this deficit, especially with Vietnam and Thailand, which have trade surpluses of $105 billion and $41 billion with the United States. respectively. Malaysia and Indonesia also run large bilateral trade surpluses.

Moreover, Trump is likely to complement the high tariff structure with further dismantling of multilateral trade agreements. Trump prefers bilateral agreements to multilateral agreements because they are more effective in dealing with trade deficits with individual countries. Already in his second term, the Biden administration has threatened to withdraw from the Indo-Pacific Economic Framework (IPEF) as early as possible, and therefore Southeast Asian economies will not get any relief from the prospect of high tariffs from the US.

The tariff plans could also be a double whammy for Southeast Asia. On the one hand, some regional economies are poised to benefit from its strategic separation from China as it becomes recipients of foreign direct investment from companies looking to diversify their production bases. At the same time, this increased scrutiny means that Southeast Asian economies, particularly those with large Chinese investments in strategic sectors such as manufacturing, digital infrastructure and high technology, could be negatively affected. Trump’s aggressive stance towards China may enable him to focus on investments of Chinese companies not only in China but also globally. This could mean that Southeast Asian companies or industries with large Chinese investments could face similar treatment as those in mainland China and face import restrictions. Washington could even restrict the export of US technologies to these sensitive sectors and economies.

Such moves could disrupt or slow growth sectors in Southeast Asian economies and affect the overall development of regional economies seeking to shift to higher value-added sectors, with Indonesia, Malaysia, Thailand and Vietnam among the hardest hit. thanks to these policies. Thailand, for example, is shifting its auto manufacturing market to produce more electric vehicles (EVs) with the help of major investments and technology transfer from Chinese EV manufacturers. Thailand’s move may be hampered by China’s large investment in this sector, as Trump has made it clear that he sees the American electric vehicle market as a strategic sector that needs to be protected.

Inflationary Pressures

Trump’s high tariff environment will increase operating costs. As U.S. import prices rise, including imports from Southeast Asia, that increase will be passed on in part to producers here, which in turn will be passed on to consumers elsewhere. Some of this will be borne by importers in the US and therefore consumers there.

Trump’s strict immigration policies will likely drive higher costs. He threatened to restrict and reverse dependence on immigrant and foreign labor, which could create a tight labor market in the United States. This will increase wages, operating costs and inevitably prices.

If Trump’s policies have the unintended effect of keeping prices high, that could stop interest rates from being lowered in the United States. In September, the US Federal Reserve aggressively cut interest rates by half a percentage point and suggested it could do more in the coming period. The year saw inflation slowing. This first interest rate cut in four years was cause for joy as it promised to boost investment and consumption globally, including in this region.

However, if Trump’s policies push costs up again, the Fed may revise its decision and keep interest rates at this level for a longer time, even if it does not increase them.

Would Harris Be Different?

There is a general consensus that Kamala Harris’ presidency will be much better for the global economy than Trump’s. I believe such a binary perspective lacks nuance.

Today, the issue of creating and preserving jobs in America has bipartisan support in the United States as a response to the idea that China is taking away American jobs.

While Trump will deal with this problem more directly and confrontationally through tariffs and restrictions, Harris will likely use human rights, labor standards, and environmental regulations to deal with China. In the case of Southeast Asia, this may be the milder and lesser of two evils; even though the region is still under US control under Harris.

Although Harris has opposed trade agreements such as the United States-Mexico-Canada Agreement and the Trans-Pacific Partnership in the past, President Joe Biden is likely to continue his approach to expanding trade with the region. What this means for trade agreements like IPEF is that while Harris commits to keeping the trade pillar vibrant and growing, she could call for stronger enforcement of environmental and labor standards, making negotiations for a deal with those countries in particular more difficult and complex. Southeast Asian countries that lag behind these standards.

Overall, Harris’ approach to trade would still be a net positive. Although there is little sign that he will push for a comprehensive trade agreement, he is less focused on correcting trade imbalances than Trump and is therefore very likely to pursue targeted sectoral or bilateral trade agreements in line with US strategic priorities. green technologies and the digital economy (especially artificial intelligence and cybersecurity) could facilitate the movement of more manufacturing from China to Southeast Asia.

On the other hand, Harris played a key role in the current Biden administration’s renewed support for US industries through the CHIPS Act and the Inflation Reduction Act (IRA). If it continues to focus on this approach, U.S. foreign direct investment into Southeast Asia could see a reversal or decline if companies reallocate those investments domestically and shorten their supply chains.

Whether Trump or Harris prevails on Tuesday, we will see an increasing move toward more “America First” policies that suit Washington’s strategic needs. While these may create some opportunities for Southeast Asian economies, the region may need to prepare for a more complex and transactional economic relationship with the United States over the next four years and possibly beyond.