‘Asia in the line of fire’! India, Thailand face higher US reciprocal tariffs risk, says Nomura

India and Thailand may face increased reciprocal tariffs from the United States due to their higher relative tariff rates and non-tariff barriers, according to a recent analysis by Nomura. The report highlights that Washington's trade policy shift under President Donald Trump could lead to broader tariff impositions across emerging and developed Asian economies.

Rising Tariff Concerns

Nomura's assessment suggests that the inclusion of non-tariff barriers—such as import policies, technical trade restrictions, and sanitary measures—raises the probability of reciprocal tariffs across multiple Asian nations. The report identifies India and Thailand as being particularly vulnerable due to their higher tariffs on US exports, especially in key sectors like agriculture and transportation.

“Emerging Asian economies, particularly India and Thailand, have elevated tariff rates on US exports and could be at risk of higher reciprocal tariffs. By sector, Asia imposes steeper duties on agricultural products and transportation, the latter of which may be easier to adjust,” the Nomura report stated.

Sectors most at risk from the potential tariff hikes include animals, vegetables, food products, textiles and clothing, footwear, and transportation equipment. These industries could see significant trade disruptions if reciprocal tariffs are enacted.

Trump’s Renewed Trade Stance

On Wednesday, US President Donald Trump reiterated his commitment to imposing reciprocal tariffs on countries like India starting April 2, 2025. During his congressional address, he emphasised the necessity of tariffs to counter long-standing trade imbalances.

“If you don’t make your product in America under the Trump administration, you will pay a tariff, and in some cases, a rather large one. Other countries have used tariffs against us for decades, and now it's our turn,” Trump stated.

Trump has already enforced a 25 percent tariff on imports from Canada and Mexico, along with an additional 10 percent duty on Chinese goods. Nomura believes that while China remains the primary focus of Trump’s America First Trade Policy (AFTP), the broader Asian market is also at risk.

“Asia is in the line of fire,” Nomura warned, pointing to the region’s substantial trade surplus with the US. Of the top 11 countries with which the US runs a trade deficit, seven are from Asia, including China, Vietnam, Taiwan, Japan, South Korea, India, and Thailand. Notably, Vietnam’s exports to the US constitute roughly 25 percent of its GDP.

Sectoral Risks and Supply Chain Shifts

Nomura's research highlights several Asian economies that could be hit by broad-based US tariff measures. Taiwan (6.3 percent of GDP), Thailand (5.6 percent), Malaysia (4.6 percent), Singapore (4.5 percent), and South Korea (4.5 percent) have notable exposure to US trade, with significant exports in electronics, pharmaceuticals, motor vehicles, and machinery.

Trump’s tariff proposals cover key industries, including semiconductors, pharmaceuticals, steel, aluminum, and forestry products. According to Nomura, about 20.6 percent of Asia’s exports to the US could be impacted, with Korea, Japan, Malaysia, the Philippines, and Taiwan seeing more than a quarter of their exports affected.

The semiconductor sector remains particularly vulnerable. Trump has indicated potential tariffs on chips, though whether this serves as a negotiation tactic to encourage Asian firms to invest in US manufacturing remains uncertain. Given Asia’s dominance in semiconductor production, such tariffs could disrupt the supply chain. However, imposing these duties may prove complex due to the geographically dispersed production processes.

“Our deep dive suggests that while the direct impact of higher chip tariffs on Asia may be modest, indirect effects are a greater concern,” Nomura noted. “A slowdown in US consumer demand could impact economies deeply embedded in the electronics supply chain, with Taiwan, Malaysia, Singapore, Korea, Thailand, and Vietnam being the most exposed.”

Nomura also warned that US efforts to clamp down on tariff circumvention could impact third countries like Vietnam, Malaysia, and Thailand, which incorporate a high proportion of Chinese value-added components in their exports to the US. This could make certain products from these countries susceptible to heightened scrutiny and additional trade restrictions.

Asian Economies Preparing for Trump 2.0

In anticipation of further trade disruptions under Trump’s potential second term, Asian policymakers are formulating strategies to mitigate risks. These include increasing investments in the US, lowering tariffs on American imports, expanding trade alliances outside the US, and adapting to shifting supply chains.

“Many Asian nations are stepping up efforts to strengthen their economic relationships beyond the US while simultaneously positioning themselves to capitalize on future supply chain shifts,” Nomura concluded.

With global trade tensions poised to escalate, India, Thailand, and other Asian economies may need to navigate a challenging landscape in the coming years, balancing trade diplomacy with economic resilience.

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