Welcome to Foreign Policy’s Southeast Asia Brief.
The highlights this week: Vietnam as a bellwether for the impact of U.S. tariffs on the region, a new Thai prime minister trips at the first hurdle, Philippine President Ferdinand Marcos Jr. positions himself as an anti-corruption crusader, and Singapore quietly buys military hardware.
Vietnam Tries to Weather U.S. Tariffs
It’s been a little over a month since U.S. President Donald Trump’s tariffs came into effect, and Vietnam, which has an export-driven manufacturing economy and which signed an early deal with the United States, is a bellwether for their impact. So far, the effects on its economy seem relatively modest—but some warning signs are flashing even as the government tries to stimulate its way out of trouble.
August saw a 2 percent decline in exports to the United States and a 2 percent decline of imports from China. But export turnover in August actually rose 2.6 percent compared to July, which suggests that Vietnam has been successful in finding new markets.
The World Bank has also revised the country’s projected growth to 6.6 percent, down from a previous forecast of 6.8 percent. But considering that earlier prediction was made in March, before Trump’s ‘Liberation Day’ tariff announcement rocked the global economy, the downturn seems manageable.
Vietnam’s most exposed sectors are in manufacturing of goods like machinery, textiles, and wood products. A major outstanding issue across all industries, however, is what the U.S.-Vietnam trade agreement calls “transshipment.” Under the deal’s terms, Vietnamese goods are subject to a 20 percent tariff, but goods transshipped from China face a 40 percent tariff.
Exactly what the Trump administration means by this is unclear. Normally, transshipment refers to deceptively rerouting goods produced in one country via another to evade tariffs or export controls. But figures in Trump’s orbit have signaled that this term could mean products with significant Chinese inputs or components—for example, a skirt using rayon spun in China.
This policy and the uncertainty around it is a massive headache for Vietnam. In Trump’s first term, his trade war pushed many manufacturers to relocate from China to Vietnam, turbocharging Vietnam’s export economy while also integrating it deeply with Chinese supply chains. Depending on what definition of transshipment is used, the 40 percent tariff could hit anything from 1.6 to 10.6 percent of Vietnam’s exports to the United States, according to the World Bank.
Even the baseline tariff of 20 percent is painful. Vietnam is the second-most trade-dependent country in the Association of Southeast Asian Nations, while Southeast Asia is the most trade-dependent region in the world. Notably, Vietnam’s tariffs are a percentage point higher than the rate for other countries in the region, including Thailand, Cambodia, Malaysia, Indonesia, and the Philippines. And 30 percent of Vietnam’s exports in 2024 went to the United States.
Despite the limited economic impact so far, there are warning signs. In the first half of 2025, Vietnam had its fastest growth in over a decade, as manufacturers rushed to ship orders before tariffs went into effect. But the World Bank is expecting a slowdown in the second half of 2025. Last week, Vietnamese Prime Minister Pham Minh Chinh said that hitting the government’s GDP growth target of around 8.5 percent this year will be “difficult,” and growth is expected to decelerate further in 2026. Perhaps international businesses were not reassured by the terms of Vietnam’s trade deal with the United States. According to my back-of-the-envelope calculations, inbound investment has slowed sharply since June.
What We’re Watching
Further turmoil in Thai politics. A Sept. 10 ruling from Thailand’s Constitutional Court has complicated the new government’s push for reform to the constitution. According to the ruling, the public cannot directly elect the drafters of the constitution, and any constitutional change will require multiple referendums.
Thailand’s current constitution was adopted in 2017, after a 2014 coup by the Royal Thai Army, and it was designed to limit threats to the Thai conservative establishment. In 2023, the complex constitutional arrangement was used to block the progressive Move Forward Party from forming a government, despite it winning the most votes in Thailand’s general election.
The ruling also complicates the life of the new Thai prime minister, Anutin Charnvirakul. Coming to power following border clashes with Cambodia and the suspension of his predecessor by the Constitutional Court, the populist conservative leads a minority government backed by progressives to whom he promised constitutional reform and an election.
Indonesia tries to buy social peace. After riots rocked Indonesia earlier this month, its newly appointed finance minister, Purbaya Yudhi Sadewa, is spending half of the country’s cash reserves on a major stimulus package. The spending comes at a time when ordinary Indonesians are feeling the pinch, which many commentators have linked to the outbreak of unrest.
A relative outsider with a thin resume, Purbaya is hoping the stimulus package will help lift the economy to the government’s ambitious target of 8 percent GDP growth. The reality may be harder. Mari Pangestu, deputy chair of the National Economic Council, warned that Indonesia’s economy needs reform, not just a stimulus. Meanwhile, the government still seems wedded to funding expensive social policies—such as the 1.5 percent of GDP that it spends on free school lunches—with sharp cuts to infrastructure spending, which some argue has disrupted the economy.
Marcos’s anti-corruption gamble. Philippine President Ferdinand Marcos Jr. has appointed an independent commission to investigate corruption in infrastructure projects from the past 10 years. The son of Ferdinand Marcos Sr., a notoriously corrupt former president, Marcos is positioning himself as an anti-corruption crusader at a time when his poll numbers have sagged. Marcos has been in trouble ever since he allowed the arrest of his popular predecessor, Rodrigo Duterte, on a warrant from the International Criminal Court. The public seems keen on anti-corruption at ongoing demonstrations—but many protesters have taken aim at the president, too, hurling mud at photos of Marcos.
Whether the independent commission will be allowed to operate as a potent and genuinely impartial force remains to be seen. Marcos has vowed that he will not protect his allies if they fall under suspicion. Martin Romualdez, Marcos’s cousin and House speaker, is among those who have been accused of graft.
Singapore rattled by Kirk killing. The death of Charlie Kirk, an American right-wing media figure, has prompted soul-searching in an unexpected location—Singapore. Two related traits characterize the multiracial island nation: high levels of public safety and a strict approach to security. On Sept. 13, Singaporean Prime Minister Lawrence Wong gave a speech to community volunteers warning of the growing risk of extremism. Invoking Kirk’s killing, he declared “digital and online technology has made extremist propaganda more accessible than before.” In addition to Singapore’s traditional preoccupation with Islamist terrorism, Wong flagged the rise of neo-Nazi and incel movements as a threat.
Home Affairs Minister K. Shanmugam called the assassination “horrific” but added, “You can’t really be surprised.” Among other reasons, he cited identity politics as a factor driving U.S. turmoil and warned Singapore should be on guard against its spread. Some politicians are playing identity politics “based on race, based on religion,” Shanmugam said. “If we go down that route, well, ultimately, Singapore will suffer.”
Photo of the Week
A giant rat float appears at the Dongdang festival in Banten, Indonesia, on Sept. 14.Donal Husni/Zuma Press Wire via Reuters
Residents of Tangerang, Indonesia, show off huge papier-mâché models for a local festival. Themes vary from the religious, to the whimsical, to the political, such as this huge besuited rat that symbolizes corrupt politicians.
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Local Voices
Chinese Indonesians are breathing a sigh of relief after they weren’t targeted by crowds in recent unrest, writes Johannes Nugroho in Nikkei Asia. During the 1998 riots, to which many have compared the recent disturbances, the community was subject to brutal pogroms. This time, though, crowds focused on police and government buildings.
A group of Cambodian nongovernmental organizations is claiming Thailand deployed “toxic smoke” during a border skirmish in August, possibly breaching the Chemical Weapons Convention and affecting locals. “When they drink rainwater, they vomit, have diarrhea and skin problems, and their pets have died, such as chickens, ducks, and pigs,” an NGO spokesperson told Seoung Nimol of CamboJA News.
In Focus
Singapore’s quiet arms buildup. Singapore recently announced that it would be buying four Boeing P-8A Poseidon maritime patrol aircraft, which offer more range, speed, and firepower than the country’s aging fleet of Fokker 50 turboprops. The purchase is just the latest of many by Singapore as it moves to quietly modernize and increase the capabilities of its military.
Prone to referring to Singapore as a “little red dot,” its government, led by the People’s Action Party since its independence, is acutely aware of the small island nation’s vulnerability. All male citizens are subject to national service, and defense spending takes up a large percentage of its national budget.
For more than two decades, the government slowly cut back on military spending. After decreasing for more than two decades, defense spending as a percentage of GDP began to pick up in 2022, according to data from the Stockholm International Peace Research Institute.
Much of the national budget seems to be going toward spiffy new hardware, in keeping with Singapore’s philosophy that, as a small country, it must make up for what it lacks in quantity with quality. In March, Defense Minister Ng Eng Hen, now retired, announced Singapore would be spending more on “big-ticket items,” and the government has followed through.
Earlier this year, there was an announcement about the purchase of two German Invincible-class submarines, bringing Singapore’s total to six. The navy’s first multi-role combat vessel, designed as a “mothership” for unmanned systems, is also in development. And, in 2024, Singapore put in orders for eight F-35A fighters—on top the 12 F35Bs that it had already ordered.
So, why the splurge? Part of it is just catching up on spending that was delayed by the COVID-19 pandemic, according to the government, which has indicated that it expects spending will begin to taper starting next year. But it also reflects the fact that Singapore feels that the world is becoming more dangerous and that it cannot fully trust its most important security partner, the United States, anymore.
In an April lecture, Wong declared, “America is stepping back from its traditional role as the guarantor of order and the world’s policeman.” As a country that thrived under the U.S. order, Singapore must now prepare for its end, he told the audience.