ASEAN
Trump announces new series of tariffs on ASEAN countries, effective 01 August
(09 July 2025) U.S. President Donald Trump announced new punitive tariffs effective 01 August on eight ASEAN economies, with rates of 36% on Thailand and Cambodia, 32% on Indonesia, 25% on Malaysia, 20% on the Philippines, 25% on Brunei Darussalam, and 40% on Lao PDR and Myanmar. Meanwhile, Viet Nam secured a reduced rate of 20% though transshipped goods through Viet Nam faces rates of 40%. ASEAN governments have so far achieved limited progress in negotiations despite offering to increase imports of U.S. goods, and Malaysia, Cambodia and Indonesia confirmed ongoing talks, emphasising a preference for diplomatic resolution. Cambodia noted its rate was already reduced from 49% in April, while Indonesia projected potential output losses of up to IDR 164 trillion (USD 10.1 billion, about 12% of 2024 GDP) if tariffs proceed, particularly impacting labour-intensive sectors. Analysts warned of increased regional uncertainty, adverse effects on industrial output due to dependence on Chinese inputs, and disincentives to investment in affected sectors. Firms are expected to re‑evaluate U.S. market reliance, while Viet Nam may gain short‑term advantage despite ongoing uncertainties in its agreement. Trump’s focus on transshipments aims to counter Chinese exporters’ use of ASEAN to bypass U.S. tariffs, prompting regional caution given China’s threat of retaliatory measures. Market observers noted the possibility of brinkmanship, with three weeks remaining for further negotiations before implementation.

ASEAN
Inflation across ASEAN continues to fall due to weaker demand
(09 July 2025) Inflation in several Southeast Asian economies continued to fall amid concerns over weakening consumer demand, political instability, and increased imports of low-cost Chinese goods. Thailand’s consumer price index declined 0.25% year-on-year in June, following a 0.57% fall in May, driven by lower food and energy prices due to favourable weather and higher agricultural supply, according to the Commerce Ministry. While Thai officials denied deflation risks, Moody’s Analytics identified Thailand as particularly vulnerable, citing a weak tourism recovery and political turmoil, including the 01 July suspension of Prime Minister Paetongtarn Shinawatra, which Maybank warned would dampen consumption and investor confidence into 2026. Singapore’s headline inflation fell to 0.8% in June, its lowest since early 2021, while Malaysia’s eased to 1.2% in May, a four-year low, with Maybank noting broad-based declines in categories like communication and clothing. Economists attributed regional disinflation partly to weaker demand amid economic uncertainty from U.S. tariffs, warning of risks if low inflation entrenches pessimistic expectations. China’s deflationary pressures and increased exports to ASEAN have intensified price competition, particularly in consumer goods and electronics.

MALAYSIA
Bank Negara Malaysia makes first rate cut in five years, marking first policy change in 25 months
(09 July 2025) Bank Negara Malaysia reduced its overnight policy rate by 25 basis points to 2.75% from 3% on Wednesday, marking its first rate cut in five years and its first policy change in 25 months, citing external uncertainties, notably U.S. President Trump’s upcoming 25% tariffs on Malaysian goods effective 01 August, as risks to growth. The rate had previously been raised by a cumulative 125 basis points between May 2022 and May 2023 before being held steady since July 2023. The central bank characterised the move as pre-emptive to support growth amid moderate inflation and geopolitical risks. Malaysia’s GDP growth slowed to 4.4% in Q1 while headline inflation fell to a 51‑month low of 1.2% in May, with core inflation at 1.8% and specific categories such as personal care, education and transport rising 3.7%, 2.2% and 2.1% respectively. A Reuters poll earlier this week showed a slim majority of economists had anticipated a 25‑basis‑point cut. Capital Economics forecast the policy rate to fall further to 2.50% by year‑end. Fitch BMI identified Malaysia, Thailand and Cambodia as among the most exposed to U.S. tariff increases, with Malaysian exports facing the full 25% levy. Despite these pressures, the ringgit has strengthened 5–6% year‑to‑date against the dollar, continuing its 2024 rally driven by favourable trade balances and weaker dollar conditions, with MIDF Research projecting an average exchange rate of 4.10 and a potential recovery to 3.90 by year‑end.

INDONESIA, CHINA
Chinese conglomerates investing billions into Indonesia’s aluminium sector
(10 July 2025) Chinese conglomerates, including Tsingshan Holding, China Hongqiao Group and Shandong Nanshan Aluminium, are investing billions of dollars into Indonesia’s aluminium sector, with Goldman Sachs projecting a fivefold increase in national production by 2030. The expansion follows Indonesia’s 2023 bauxite export ban and continuation of downstreaming policies under President Prabowo Subianto, aimed at fostering manufacturing growth and funding socio-economic programmes. CRU Group expects three new alumina refineries to commence operations in 2025 and at least three more by 2027, while Goldman Sachs projects four additional smelters by decade-end, adding to the two already running. Each refinery costs approximately USD 1 billion, with Chinese investors offering capital and equipment to Indonesian partners. Indonesia’s limited bauxite reserves compared to nickel may constrain growth, while reliance on coal-fired power raises concerns over electricity security and cost. Analysts have questioned whether planned projects will materialise given aluminium prices near USD 2,500/tonne and infrastructure risks, though others note China’s proven ability to scale industries. Indonesia’s bauxite ban has also pushed China to reduce reliance on Guinea, reinforcing its motivation to diversify supply chains through Southeast Asia.

INDONESIA
Increasing number of educated Indonesians migrating abroad for work
(08 July 2025) An increasing number of educated Indonesians are leaving to work abroad due to low domestic salaries, limited career prospects, and cuts to education budgets under President Prabowo Subianto’s administration. 2024 saw an 83% rise in migrant workers with diplomas (to 4,505) and a 2.3-fold rise among those with bachelor’s degrees (to 3,421), together making up 2.7% of emigrants, up from 1.4% in 2019. Tertiary enrolment has grown to 45%, yet unemployment among graduates remains higher (5.25%) than among junior high school leavers (4.11%), and 59% of workers are now in the informal sector. Social media campaigns such as “Just escape for now” and protests over tuition hikes highlight youth frustration. Indonesian firms such as GoTo, Mind ID, and BCA are investing in training and career development to retain talent, but private R&D spending remains low at 0.65% of GDP. Business leaders warn the talent drain threatens long-term competitiveness, while government officials urge returning migrants to contribute to national development.

VIET NAM
Viet Nam preparing stricter sanctions and inspection procedures to combat transshipments
(10 July 2025) Viet Nam is preparing a new government decree introducing stricter sanctions and inspection procedures to combat trade fraud and illegal transshipment, particularly of Chinese goods, in line with commitments under a preliminary tariff agreement reached with U.S. President Trump on 03 July. The agreement reduced proposed U.S. tariffs on Vietnamese imports to 20% from 46%, while maintaining a 40% levy on goods deemed illegally transshipped through Viet Nam. The draft decree mandates intensified inspections of exports to the U.S., with a focus on high‑risk categories such as wooden furniture, plywood, steel machine parts, bicycles, batteries, wireless headphones, and other electronics. It cites fraudulent practices such as forged origin certificates, fake documentation, and import of counterfeit goods, which have reportedly increased in recent years. The decree plans stricter oversight of self‑certified origin claims, enhanced on‑site inspections, and closer control over certificates of origin, though specific penalties are still under revision. The U.S. is also pressing Viet Nam to reduce dependence on Chinese components, particularly for electronics. Details on how Washington will define illegal transshipment, required domestic value‑added thresholds, and finalisation of the deal remain unclear. Bilateral trade data show Vietnam’s exports to the U.S. and its imports from China each totalled around USD 140 billion in 2024, reflecting the relocation of manufacturing since 2018 but also rising Chinese input reliance.

SINGAPORE
Singapore unveils grant to help SMEs brace for US tariff fallout
(10 July 2025) The Singapore Economic Resilience Taskforce (SERT) announced a Business Adaptation Grant to be launched by October 2025, capped at SGD 100,000 (MYR 331,000) per company, with more generous allocations for SMEs, which employ about two-thirds of the workforce. The grant will support companies exporting to or operating in overseas markets affected by tariffs, covering advisory services on free trade agreements, trade compliance, legal and contractual issues, supply chain optimisation, market diversification, and reconfiguration costs such as logistics and inventory. Manpower Minister Tan See Leng indicated further details will follow. Deputy Prime Minister and Trade and Industry Minister Gan Kim Yong said US tariffs will prolong uncertainty and reiterated Singapore’s exposure to a 10% baseline tariff. He urged continued negotiations to lower tariffs and announced plans to visit the US this month to discuss concessions on pharmaceutical tariffs and broader economic cooperation, noting semiconductor discussions will follow pharmaceutical talks. Gan added the economy should remain stable in the first half of the year but warned of slower growth in the next 6–12 months due to higher tariffs and reduced front-loading effects.

RCEP Monitor

AUSTRALIA
Australia announces AUD 1.28 billion development programme for ASEAN
(10 July 2025) Australian Foreign Minister Penny Wong announced an AUD 1.28 billion development programme for ASEAN to address needs arising from significant USAID funding cuts, including over AUD 1 billion dedicated to fostering economic prosperity, climate resilience, and regional stability. Speaking at an event organised by ISIS Malaysia and the Australian High Commission alongside the 58th ASEAN Foreign Ministers’ Meeting, Wong outlined allocations for humanitarian initiatives such as vaccination and HIV/AIDS programmes in the Philippines, and free meal schemes for children and pregnant women in Indonesia. Australia will also provide an additional AUD 16 million in humanitarian aid to Myanmar and Rohingya refugees, including in Bangladesh. The USAID cuts, announced in March and estimated by The Lancet to potentially result in 14 million avoidable deaths by 2030, prompted Australia to reaffirm its strategic partnership with ASEAN and the Indo‑Pacific, highlighting collective resilience, sovereignty, and integration over militarisation. Wong also underscored the value of middle‑power collaboration, referencing Malaysia as Australia’s largest source of international students and its fourth‑largest technology investment destination.

NEW ZEALAND
RBNZ maintains benchmark interest rate at 3.25%, signals further easing if inflation moderates
(09 July 2025) The Reserve Bank of New Zealand (RBNZ) kept its benchmark interest rate at 3.25% on Wednesday, pausing after 225 basis points of cuts since August 2024, and signalled it may ease policy further if inflation moderates as projected. Meeting minutes confirmed the decision aligned with the May projections, with the next cut likely in August given near-term inflation risks and trade tensions. Inflation stands at 2.5% and is expected to reach the top of the 1–3% target band in Q2 and Q3 2025. The RBNZ noted heightened global policy uncertainty, tariffs, and subdued global growth as headwinds to New Zealand’s recovery, which remains fragile despite lower rates and elevated export prices. The New Zealand dollar fell 0.3% to USD 0.5977, and markets pushed back expectations of further easing until August. Capital Economics projected the terminal rate at 2.5%, below the RBNZ’s implied 2.75%. The RBNZ had previously raised rates by 525 basis points from 2021–2023 to combat inflation, tipping the economy into recession, with growth still constrained by weak demand and tight fiscal policy. In contrast, the Reserve Bank of Australia left its rate at 3.85% this week, diverging from New Zealand’s sharper monetary easing path.

SOUTH KOREA
South Korea announces plans to intensify trade negotiations with the US
(08 July 2025) South Korea announced plans to intensify trade negotiations with the United States after receiving a letter from President Donald Trump on 07 July stating his intent to impose a 25% tariff on South Korean goods from 01 August, while framing the letter as an effective grace period to reach agreement. The Industry Ministry confirmed it would use the remaining time to pursue a mutually beneficial outcome, improve domestic systems addressing the US trade deficit, and advance industries through a manufacturing partnership. South Korea recorded a record USD 55.6 billion trade surplus with the US in 2024, up 25% year-on-year, mainly from car exports, while the US ran an USD 66 billion deficit with South Korea, its eighth largest. High-level talks have already taken place, with National Security Adviser Wi Sung-lac meeting US Secretary of State Marco Rubio in Washington, where both sides agreed a summit between President Lee Jae Myung and Mr Trump could advance cooperation. Mr Trump signalled openness to negotiation, saying the deadline was “firm, but not 100% firm”. South Korea, under a new administration since 04 June, acknowledged insufficient time to resolve all issues before high-level negotiations began. The US remains South Korea’s second-largest export market, worth USD 127.8 billion in 2024, accounting for 18.7% of exports, which in total represent over 40% of GDP, with semiconductors, smartphones, cars, and batteries central to global supply chains.