Vietnam's GDP growth to drop 1 percentage point after President Trump's tariffs: Maybank

The GDP growth downgrades are larger for Vietnam (-1 percentage point) and Malaysia (-0.6 percentage point) after President Donald Trump's tariffs, according to Maybank's release on Friday.

Maybank said that export and investment growth will likely be lower than previously projected as President Trump announced sweeping reciprocal tariffs on about 180 countries, including ASEAN, last Wednesday.

The U.S. has imposed higher than expected reciprocal tariffs on Vietnam (46%), Thailand (36%), Indonesia (32%), and Malaysia (24%). The Philippines (17%) and Singapore (10%) will face relatively lower tariffs.

Therefore, Maybank lowered the U.S. GDP growth forecast to 1.7% from 2.0%, and the China GDP prediction to 4.2% in 2025 from 4.5%.

Bigger downgrades for Vietnam, Malaysia, and Singapore

The GDP growth downgrades are larger for Vietnam (-1 percentage point), Malaysia (-0.6 percentage point), and Singapore (-0.5 percentage point), given their heavier reliance on trade and the higher reciprocal tariffs on Vietnam.

The GDP downgrades are more modest for Thailand (-0.3 percentage point), Indonesia (-0.3 percentage point), and the Philippines (-0.2 percentage point).

Risks remain to the downside if the global trade war broadens and intensifies, as some countries (EU, China) are planning retaliatory tariffs.

The U.S. has not finalized a decision on a potential 25% tariff on semiconductors - which could impact Malaysia and Singapore - and on pharmaceuticals - which could impact Singapore.

Critical minerals, energy, and energy products are exempted from the reciprocal tariffs. The reciprocal tariffs will not be stacked on previously announced 25% tariffs on autos, steel, and aluminum.

“China+1” narrative not dead, but may pause

The China+1 story is not dead, but the reciprocal tariffs will likely disrupt and slow the reconfiguration of supply chains to ASEAN, Maybank wrote.

The ASEAN-China tariff gap remains wide but has narrowed with the reciprocal tariffs, especially for Vietnam and Thailand.

"China will face an effective U.S. tariff rate of 66%, by our estimates, with the reciprocal tariff rate (34%) added to the recent additional tariffs (20%) and tariffs under the Trump trade war 1.0 (12%)."

Lower inflation opens the door for rate cuts

Maybank trimmed its inflation forecasts for ASEAN-6 to 2.1% in 2025 from 2.4%, and 2.1% in 2026 from 2.5%. Slowing global growth and the displacement of excess capacity, particularly from China, will likely dampen price pressures in ASEAN.

Maybank expects the Fed to cut its policy rate by 50 basis points (bps) in 2025, as the tariffs and other U.S. measures will likely hurt growth and unemployment, outweighing the risks from near-term inflation pressures.

The Fed rate cuts and lower ASEAN inflation will open the door for more ASEAN central banks to ease, including Indonesia (-50 bps), Philippines (-50 bps), Thailand (-50 bps), Vietnam (-25 bps), and Singapore in 2025. Fiscal stimulus may be more limited given the higher public debt and deficit positions, with the exception of Singapore.

In its latest macroeconomic update about Vietnam released on Friday, Standard Chartered Bank said its Vietnam GDP growth forecast for 2025 remains at 6.7%, with moderation expected in H2.

"Vietnam’s economic outlook remains supported by strong integration into global trade networks through multiple free trade agreements, along with continued foreign direct investment (FDI) inflows. These factors continue to strengthen the country’s position in global production and exports," the bank wrote.

Tim Leelahaphan, senior economist for Vietnam and Thailand, Standard Chartered Bank, remarked: “While economic growth remains strong, trade risks and currency fluctuations could impact policy decisions. Vietnam may consider have flexible monetary policies to ensure resilient financial sector and navigate potential economic fluctuations.”