ASEAN, UNITED STATES
US Supreme Court ruling quashing Trump tariffs sparks varying reactions in ASEAN
(26 February 2026) The Supreme Court of the United States ruled on 20 February that President Donald Trump’s use of the International Emergency Economic Powers Act to impose reciprocal tariffs without congressional approval was unconstitutional. Trump subsequently invoked Section 122 of the US Trade Act of 1974 to impose a temporary global 10% tariff, effective 24 February, valid for 150 days and capped at 15%, and has indicated plans to raise it to 15%. It has also been suggested that Trump may use non-trade barriers measures more aggressively. Most Southeast Asian countries had previously faced tariffs of at least 19%, with Lao PDR at 48%, Cambodia at 49%, Thailand at 36%, and Viet Nam at 46% under earlier measures, later reduced in several cases through bilateral agreements. Viet Nam’s rate had been reduced to 20%, Thailand’s to 19%, and Cambodia secured exemptions for thousands of products. The temporary 10% rate narrows tariff differentials and is expected to prompt exporters, particularly in Viet Nam and Thailand, to accelerate shipments during the 150-day window. Singapore remains at 10% and recorded a US goods trade surplus of USD 3.6 billion with Singapore in 2025, up from USD 1.9 billion in 2024, potentially narrowing its relative advantage. Indonesia and Malaysia, which signed reciprocal agreements with Washington in October and last week, respectively, face domestic pressure to renegotiate; their agreements exempt selected exports such as Indonesian palm oil and Malaysian semiconductors but grant preferential access to US products and include clauses allowing higher tariffs if future trade pacts threaten US essential interests. The Indonesian think tank CELIOS is considering a legal challenge, while five Malaysian opposition MPs filed a motion with the Federal Court alleging lack of parliamentary approval, while four MPs from the ruling Parti Keadilan Rakyat called for suspension of ratification. The US has threatened more severe sanctions against countries seeking to withdraw from existing deals. A July UNCTAD report recorded an 11% decline in global foreign direct investment, with trade tensions cited as a risk to confidence, reinforcing calls for ASEAN diversification and increased intra-regional trade.

VIET NAM
Viet Nam’s deficit to increase as government advances large-scale infrastructure investments
(26 February 2026) Moody’s Ratings stated on 26 February that Viet Nam’s fiscal deficit and public debt are expected to increase as the government advances large-scale infrastructure investments. The country launched hundreds of major projects last year with an estimated total value of approximately USD 200 billion as part of a strategy to boost growth and diversify its export-reliant economy. Viet Nam is targeting a fiscal deficit of 4.2% of GDP this year, up from 3.8% in 2025. Public debt stood at around 33% of GDP last year and is projected to rise but remain below regional peers at roughly 40% of GDP by the end of the decade. Moody’s said a reform agenda initiated under top leader To Lam is expected to support banks and reduce their exposure to the real estate sector. Loan growth to real estate reached 42% year-on-year by the end of September, compared with an average of 27% between 2022 and 2024, with exposure forecast to stabilise this year. Vietnamese banks reported a Tier 1 capital ratio of 9%, about half the South-East Asian average, though the gap is expected to narrow due to higher capital requirements. Moody’s urged certain large state-owned banks to build capital buffers more aggressively, citing Bank for Investment and Development of Vietnam and VietinBank as having modest capitalisation relative to most private commercial banks.

INDONESIA
Indonesia completes largest global bond sale since at least 2017
(26 February 2026) Indonesia completed its largest global bond sale since at least 2017, raising EUR 2.7 billion through a three-part euro-denominated issuance and CNY 9.25 billion (USD 1.3 billion) via offshore yuan notes. The euro tranche attracted EUR 9.2 billion in orders excluding underwriters, reflecting a 3.4-times oversubscription ratio and enabling pricing at tighter risk premiums than initially indicated. Credit spreads on the offshore yuan notes also tightened, signalling competitive funding costs. The transaction follows Moody’s Ratings’ decision earlier this month to revise Indonesia’s Baa2 outlook to negative, citing risks including sustained budget deficits, prolonged currency depreciation, capital outflows or weakening state-owned enterprises. A downgrade would mark the first by Moody’s since 1998 during the Asian financial crisis, when Indonesia required support from the International Monetary Fund. Indonesia recorded a January fiscal deficit of IDR 54.6 trillion (USD 3.25 billion), equivalent to 0.21% of GDP, compared with typical post-pandemic January surpluses. Analysts at Citigroup Inc. expect the fiscal deficit to widen beyond the legal limit this year due to higher spending on a nationwide free meals programme and reconstruction in flood-affected provinces in Sumatra. The bond sale follows significant volatility in domestic assets, including the worst equity sell-off in nearly three decades after MSCI Inc. warned of a potential downgrade of Indonesia’s equity market classification to frontier status. The offshore yuan issuance marks Indonesia’s return to the dim sum bond market after its debut sale in October, amid strong global demand and low funding costs for such instruments.

THAILAND
Thailand mulls phased sodium tax on packaged food manufacturers
(26 February 2026) Thailand’s Excise Department is preparing a proposal for a phased sodium tax on packaged food manufacturers, which if approved would make Thailand the first country in Asia to impose nationwide levies on both sugar and salt. The deputy director-general of the Excise Department said the proposal will be submitted to the new government and would adopt a tiered structure similar to the 2017 sugar tax, with rates increasing according to total sodium content per serving. The tax would apply to total sodium content, including preservatives and baking soda, but exclude freshly cooked food, ready-to-eat meals and fast food. The first phase would impose a very low rate targeting only the highest sodium products for at least six years to allow reformulation. The measure aims to encourage manufacturers to reduce sodium content rather than raise fiscal revenue. Thailand’s 2024–2025 National Health Survey shows average daily sodium consumption of 3,650mg among those aged 15 and above, nearly double the World Health Organisation’s recommended limit of 2,000mg. High sodium intake has been linked to hypertension, kidney and cardiovascular diseases, with associated healthcare costs estimated at THB 1.6 trillion annually. The Excise Department has identified instant noodles, frozen meals and savoury snacks as key contributors to sodium intake, with high-sodium products accounting for almost 20% of the ready-to-eat and semi-finished food market value in 2022. A December study by Mahidol University estimates that a sodium tax on instant noodles and snacks could reduce daily intake by 53mg to 83mg. Industry resistance is reported, including concerns over disproportionate impact on lower-income households and doubts about behavioural change.

THAILAND
Rice exports to fall 11% year-on-year to 7 million tonnes in 2026
(25 February 2026) Thailand’s rice exports are projected to fall 11% year-on-year to 7 million tonnes in 2026, the Thai Rice Exporters Association said, marking the lowest level in five years. Annual export revenue from rice is approximately USD 4 billion, and Thailand slipped to third place globally last year. The decline is attributed to an appreciation of more than 8% in the baht over the past year to a near five-year high against the US dollar, reducing price competitiveness. Benchmark 5% broken white rice from Thailand is priced USD 20 to USD 30 per tonne above comparable grades from India and Vietnam. Thailand’s Hom Mali variety is priced at about USD 1,110 per tonne, compared with roughly USD 800 for Vietnam’s ST25. The president of the association stated that the baht is overvalued and warned that insufficient export volumes would increase downward pressure on domestic prices. The Bank of Thailand cut interest rates unexpectedly and said it is closely monitoring currency movements. Export performance is also affected by softer external demand, including Indonesia halting imports and the Philippines tightening restrictions. Rice is a major source of rural income in an economy where exports account for around 60% of GDP, raising risks to farm incomes and domestic price stability if the price differential persists.

THAILAND
Bank of Thailand unexpected reduces rate by 25 basis points to 1%
(25 February 2026) The Bank of Thailand reduced its policy interest rate by 25 basis points to 1%, effective immediately, in a decision that diverged from market expectations, with 21 of 27 economists surveyed by Reuters having forecast no change. Four members of the Monetary Policy Committee supported the cut to maintain supportive financial conditions, ease debt burdens for small and medium-sized enterprises and anchor medium-term inflation expectations amid downside risks, while two members voted to hold the rate at 1.25%. The committee stated it would prioritise safeguarding medium-term financial stability and preserving limited monetary policy space, while monitoring risks of financial imbalances from a low-rate environment. Thailand’s economy expanded 2.4% in 2025, according to the National Economic and Social Development Council, compared with 4.5% regional growth in Southeast Asia reported by the Asian Development Bank. Fourth-quarter 2025 growth was 2.5%, and Thailand’s Deputy Prime Minister and Finance Minister said the economy had likely bottomed out in that period with a rebound expected in 2026. The central bank projects growth to remain below potential and uneven across sectors in 2026 and 2027 due to structural constraints and intensified competition. Analysts forecast 2026 growth of 1.5% to 2.1%. The general election on 8 February resulted in the Bhumjaithai Party securing 193 of 500 lower house seats and leading efforts to form a new government, with business representatives citing political stability as critical to recovery. The committee stated that structural growth challenges cannot be resolved by monetary policy alone and called for coordinated policy measures to enhance productivity and competitiveness.

MALAYSIA
Malaysia now accounts for more than half of under-construction data center capacity across ASEAN markets
(26 February 2026) Asia is experiencing accelerated data centre development driven by demand for artificial intelligence and cloud computing, with constraints in Singapore between 2019 and 2022 prompting expansion into neighbouring markets. Malaysia now accounts for more than half of under-construction capacity across five regional markets, including Indonesia, Thailand, the Philippines and Viet Nam, according to DC Byte. Rapid growth has been concentrated in Johor state, supported by streamlined permitting and predictable utility allocation, although local authorities have introduced tighter water and power requirements for new facilities. In Indonesia, project timelines are slowed by coal-reliant and unreliable power supply, renewable energy approval delays, grid access uncertainty and extended permitting processes. Microsoft is investing USD 1.7 billion in Indonesian cloud and AI infrastructure and has agreed with the state electricity provider to add approximately 200 megawatts of renewable capacity over ten years. Google launched a new cloud region in Bangkok in January and estimates its data centre investments will generate more than USD 40 billion in economic value for Thailand over five years. Thailand faces potential constraints in delivering power to preferred data centre locations. The Philippines is preparing for increased data centre construction aligned with its expanding digital economy. Viet Nam is attracting attention due to strong demand and power availability, although permitting remains a constraint despite government efforts to streamline processes and develop dedicated technology parks. Industry expectations indicate potential entry of additional multinational providers into Viet Nam if early projects demonstrate regulatory effectiveness.

RCEP Monitor

CHINA, JAPAN
China adds 20 Japanese entities to its export control list amidst spat with Japan
(24 February 2026) China’s Ministry of Commerce of the People’s Republic of China added 20 Japanese entities to its export control list and placed a further 20 on a monitoring list, marking the first inclusion of Japanese firms since the list’s January 2025 launch. Blacklisted companies include shipbuilding and aerospace affiliates of Mitsubishi Heavy Industries, prohibiting Chinese exporters and overseas entities from supplying them with dual-use items or China-origin dual-use technology. The monitoring list includes Subaru, Hino Motors and TDK Corp., requiring exporters to submit end-user documentation, risk assessment reports and written pledges that goods will not support Japan’s military capabilities, and barring use of general licences. The measures expand earlier restrictions announced this year blocking exports to Japan with military applications, and introduce stricter scrutiny rather than outright bans for monitored firms. The actions follow Prime Minister Sanae Takaichi’s recent landslide election victory and her prior comments suggesting Japan could deploy its military if China used force against Taiwan, which she has declined to retract. Tokyo has protested the measures and demanded their withdrawal. China stated the curbs are intended to deter Japan’s remilitarisation and nuclear ambitions, while indicating law-abiding firms have no cause for concern. China’s dual-use export control regime covers more than 800 items including rare earths, chemicals, electronics, sensors and aerospace-related technologies. Japan sourced around 70% of its rare earth imports from China as of 2024, highlighting supply chain exposure. Some affected companies stated they are reviewing the measures or have limited or no China-linked imports. Analysts indicated the steps may function primarily as a political signal, with civil-use exports potentially continuing subject to documentation requirements.

AUSTRALIA
Monthly inflation in January rises 3.4% year-on-year, above 2-3% target band of central bank
(25 February 2026) Australia’s monthly inflation in January rose 3.4% year-on-year, above the 3.3% consensus and remaining above the 2–3% target band of the Reserve Bank of Australia for a seventh consecutive month. Headline CPI increased 3.8% annually, unchanged from December. Housing inflation accelerated to 6.8% from 5.5%, driven by electricity as well as new dwelling and rental costs, with electricity prices rising 32.2% over the year compared with 21.5% previously. Food and non-alcoholic beverages rose 3.1% due to higher wage and ingredient costs. Financial markets increased expectations of further tightening, pricing a move in May that would lift the cash rate to 4.1% and assigning a 70% probability of a third increase in November. Barrenjoey Markets Pty Ltd forecast two additional hikes this year, taking the rate to 4.35% by August. Goldman Sachs Group Inc. said a consecutive hike in March remains possible, although overnight-indexed swaps imply less than a 20% chance at the 16–17 March meeting. The Australian dollar strengthened and three-year government bond yields rose as much as 5 basis points to 4.29% following the data release. The currency has appreciated more than 6% against the US dollar this year, supported by policy divergence and commodity prices. The central bank stated it will continue to rely primarily on quarterly inflation data for forecasting while assessing the properties of the new monthly series. Unemployment remains low at 4.1%, and analysts cited a positive output gap and elevated unit labour cost growth as additional factors supporting a restrictive policy stance.

SOUTH KOREA
Bank of Korea keeps policy rate unchanged at 2.50% on 26 February
(26 February 2026) South Korea’s Bank of Korea kept its benchmark policy rate unchanged at 2.50% on 26 February, in line with expectations from 34 economists surveyed by Reuters. The seven-member monetary policy board also raised its 2026 GDP growth forecast to 2.0% from 1.8%, citing a chip-driven export boom led by Samsung Electronics and SK Hynix. Inflation remains steady, allowing the central bank to maintain a prolonged pause in its easing cycle initiated in October 2024 while monitoring financial stability risks and household debt. The decision reflects resilience amid trade uncertainties, including potential disruptions from U.S. tariff policy shifts affecting key sectors such as automobiles and steel. Analysts noted that a rate hike is only likely if inflation exceeds 2.5% and the dollar-won exchange rate surpasses 1,550. South Korea’s equity market showed strength, with the KOSPI surpassing 6,000 for the first time, extending gains after doubling in value over the past year. The central bank’s stance signals a cautious approach, balancing export-driven growth with external trade risks and domestic financial stability concerns.