Southeast Asian Exports Seen Surging Through 2030

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Source: Bloomberg

A growing number of companies are changing where they produce or do business to avoid tariffs and other barriers to global trade — shifts that might double exports from some Southeast Asian economies over the next six years.

In a new report from Nomura, which spoke to more than 100 multinationals and tracked foreign investment flows across the world, the beneficiaries as production diversifies away from China are mainly India, Vietnam, Malaysia and Mexico.

“With US-China trade tensions intensifying, firms are looking to reduce their over-reliance on China and diversify supply chains, or are shifting production to bypass trade restrictions and hedge against the risk of further sanctions,” the analysts wrote.

Production relocation or expansions are most visible in sectors including automobiles and components, electronics, apparel and toys, capital goods, consumer durables and semiconductors.

According to the research, the majority of investment into India is from the US and developed countries in Asia such as Japan, while Chinese companies are leading the push into Southeast Asia.

And the benefits will be substantial: Nomura estimates that Vietnam’s exports will double by 2030 to more than $750 billion a year, while Malaysia will be shipping goods worth $652 billion by then.

But it will be hard to fully break the reliance on China, with many intermediate goods still likely to come from the world’s largest manufacturing nation for many years to come. And those changes will cause dislocation and some losses, with the International Monetary Fund warning about increasing signs of fragmentation.

“Trade across countries that are more geopolitically aligned is holding up better than trade across countries that are less geopolitically aligned,” the fund’s First Deputy Managing Director Gita Gopinath said in Beijing in an interview with Bloomberg News earlier this week.