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Apr, 2025Apr 25, 2025
Is the U.S. Market Losing Its Shine? Time to Look Southeast
People always say that an empire collapses from inside. The U.S. market, once a global powerhouse, is showing cracks under the weight of tariffs, trade wars, and internal economic strife. Meanwhile, Southeast Asia’s booming e-commerce market offers a vibrant alternative for businesses seeking growth.
The Uncertainty of the U.S. Market
On April 17, 2025, California Governor Gavin Newsom intensified his critique of President Trump’s tariff policies during a press conference at an almond farm in Ceres, California. He proclaims that this series of actions are “economically devastating,” warning that “no state is poised to lose more than the state of California.” Thus, following the criticism, the State of California officially filed a lawsuit against the Trump administration, challenging the legitimacy of all the tariffs that Trump enacted without congressional approval. Newsom is actively seeking solutions that avoid California, the fourth-largest economy in the world that relies heavily on international trade, being affected by the retaliatory tariffs from Canada, Mexico, and China that’s caused by the trade war that Trump has started.
▲Picture's from Los Angeles Times, copyright belongs to original authors
According to recent reports, the U.S. in mid-April further raised tariffs on Chinese goods. Specifically, on April 9, the U.S. implemented a 125% reciprocal tariff targeting certain Chinese products, stacked atop the existing tariff structure. News reports show this reciprocal tariff was a response to China’s earlier 84% tariff, aimed at balancing trade relations. Additionally, the U.S. maintains a 20% fentanyl tariff, part of a February policy to address drug inflows. Meanwhile, Section 301 tariffs on certain products like electric vehicles and solar panels remain as high as 100%, stemming from prior trade policies. For some products, such as electric vehicles, the total tariff could reach 125% (reciprocal tariff) + 20% (fentanyl tariff) + 100% (Section 301 tariff) = 245%.
Analysis shows these tariffs’ actual impact varies by product category. For instance, some consumer goods might only face the 20% fentanyl tariff and lower Section 301 tariffs, while high-tech products like electric vehicles bear the full 245% tariff burden. This has sparked controversy, with some economists arguing the impact on specific industries could lead to supply chain adjustments and price hikes.
China reacted swiftly. On April 11, China’s Ministry of Finance announced a 125% tariff on U.S. goods starting April 12, a direct retaliation to the U.S.’s 125% reciprocal tariff. China stated this move was a necessary defense of its legitimate rights but hinted it wouldn’t further escalate the tariff war.
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Perspectives on the Trade War
In a macro strategy discussion on April 8, Morgan Stanley’s Chief China Economist Robin Xing shared his views on this U.S.-China tariff war. He pointed out that tariff intensity is almost entirely driven by the U.S. trade deficit, not reciprocal tariffs, with the goal of bringing manufacturing back to the U.S. So, the initial international perception of tariffs as a negotiation tool no longer holds water, and the possibility of the U.S. and global markets isolating from each other, with international trade regressing to a vacuum, is rising.
Due to the pandemic, U.S. stock markets were far more inflated than China’s, and with the U.S. Treasury’s fiscal and the Fed’s monetary policy now barely able to calm markets, this tariff war’s impact on U.S. financial markets will hit harder and shake things up more. Over the past few decades, U.S. financial markets could shield themselves from global shocks thanks to the balance between U.S. stocks and bonds, but this won’t hold in the future.
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On April 18, during a podcast hosted by Andrew Napolitano, a former New Jersey Superior Court judge, a clip from a Chinese TikTok influencer was played for guest Professor John Mearsheimer, a political science staff member at the University of Chicago. In the video, the young Chinese man delivered an “incitement and inspirational message from the Communist ideology” in English to American audiences: both China and the U.S. gain profit from their interlinked trading partnership, but while the Chinese government uses these profits for national infrastructure and social equality, U.S. oligopolies exploit the middle and working classes, turning bilateral trade profits to their own interests, leaving society with economic inequity and stagnated public goods development.
YouTube comments under the 30-minute podcast, where the clip was just a short interlude, shockingly showed unanimous agreement with the influencer. When the camera shifted to Professor Mearsheimer, he pointed out an interesting irony: what these Chinese influencers suggest mirrors the exact propaganda Trump and his team used to win votes in all three presidential campaigns, a key reason for his two victories. This feels ironic when juxtaposed with recent critiques of “Trump bragging about making billionaires even richer.”
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Mearsheimer’s Take on U.S.-China Relations
Years ago, during Trump’s “gap years” between presidencies, Professor Mearsheimer, a Democratic scholar, visited China in 2022 and gave an interview with a China Daily journalist. His views on contemporary U.S.-China relations aligned with his 2014 paper.
First, he believes this competition is a zero-sum game: one side’s gain in economic resources, international political influence, or anything else means the other side loses in those areas.
Second, the current U.S.-China relationship is a safety competition, with potential to evolve into a hot war due to “triggers” like the South China Sea (Philippines), Taiwan, or Korea. However, nuclear powers and “the rationality in both Beijing and Washington” currently restrict these possibilities.
Third, he sees it as totally rational and logically correct for China to rise and gain more international power, just as it makes sense for the U.S. to resist China’s growth. The former is driven by the need to avoid invasion from neighbors or powerful nations; the latter stems from fear of losing influence in Eurasia.
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Last but certainly not least, a point he’s spent years illustrating, China can’t rise peacefully. His theory of Offensive Realism claims that in an anarchic international system, great powers are the main actors. Rational great powers, uncertain of others’ intentions and possessing offensive military capabilities, strive to survive. Under this lens, great powers are revisionists maximizing power, leaning toward buck-passing and self-elevation over balancing strategies when pursuing dominance.
This theory shapes his pessimistic view of U.S.-China relations. As China’s power grows, Mearsheimer predicts it will seek to dominate Asia, much like the U.S. dominates the Western Hemisphere. This ambition will clash with U.S. efforts to maintain global and regional dominance, setting the stage for conflict. The U.S. has strong Asian alliances to counter China’s rise, but these could entangle it in avoidable regional conflicts, heightening tensions.
Moreover, Mearsheimer doesn’t believe economic ties between the U.S. and China can prevent conflict. He cites World War I, where economic interdependence failed to stop war, arguing that security concerns typically outweigh economic considerations.
The Rise of Southeast Asia: A Market Full of Potential
Whether this tariff war is a hollow “political struggle” or a real “economic sanction,” it should ring alarm bells for trade practitioners and export businesses in both nations: it’s time to find alternatives. Right now, the rising, vast Southeast Asian e-commerce market is undoubtedly a land worth noticing.
Southeast Asia’s e-commerce market has grown significantly in recent years, reaching about $159 billion in 2024 and projected to hit $370 billion by 2030, with a compound annual growth rate (CAGR) of around 15%. Forecasts suggest the total e-commerce market size will reach $180-200 billion.
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With a 650 million population base, Southeast Asia is massive. Most countries here are developing nations in a phase of rapid economic growth, with a notably young demographic—over 70% are under 30, with a median age of 30.5. This contrasts sharply with aging markets like China and developed Western nations, where the median consumer age ranges from 38 to 45. This age advantage not only fuels digital consumption in e-commerce and social entertainment but also creates structural opportunities: emerging middle classes (like Singapore’s 30-40 age group with household incomes over $16,000) drive premium consumption, while young consumers’ demand for affordability boosts lower-tier markets.
▲Data from ResearchGate, copyright belongs to original authors
Statistics show Indonesia leading with a massive $94.48 billion market, nearly half the region’s share. Its 270 million population and 215 million internet users propel platforms like Shopee, Tokopedia, and Bukalapak, with clothing and electronics as top categories. Thailand follows with $37.62 billion, where live shopping and influencer marketing have boosted Shopee and Lazada, with the market expected to double by 2030.
Vietnam, with a 28% CAGR, is the fastest-growing market, projected to reach $28 billion by 2025. Government digitization policies and a rising middle class fuel Shopee, Lazada, and Tiki, with live e-commerce thriving. The Philippines and Malaysia, with $17.65 billion and $12.26 billion markets, show high growth potential at 13.78% and 14.32% CAGR. The Philippines benefits from a young population and high smartphone penetration, with social e-commerce booming on Facebook and Instagram. Malaysia’s solid digital infrastructure drives Shopee’s 55 million monthly visits. Singapore’s $11 billion market, though smaller, boasts a 96% internet penetration rate and 55% cross-border transaction share, making it ideal for high-end tech sales.
Insights into Southeast Asia: Market Trends and Opportunities
In Southeast Asia’s cross-border e-commerce market, consumers mainly buy fashion apparel, beauty products, jewelry, electronics, and home goods. These categories vary by country—Singapore excels in jewelry and fashion cross-border sales, while Vietnam and the Philippines show strong demand for electronics and beauty items.
Consumers shop cross-border for products unavailable locally, better prices, higher quality, and trusted international brands. For example, Singaporeans benefit from tax exemptions on imports under SGD 400.
To succeed in Southeast Asia’s cross-border e-commerce, businesses should focus on key platforms. Lazada, founded in 2012 by Maximilian Bittner and initially backed by Rocket Internet, was acquired by Alibaba Group in 2016. Operating in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, it uses a marketplace model, selling both its own inventory and third-party goods. Known for its wide range—electronics, fashion, beauty, and home goods—Lazada launched LazMall for authenticity and fast delivery. With a strong logistics network and a goal to serve 300 million customers by 2030, it’s a major regional player.
Shopee, launched by Sea Limited in 2015, is Southeast Asia’s largest e-commerce platform, famed for its mobile-first approach and features like Shopee Live. Operating across Southeast Asia, East Asia, and Latin America, it hit $78.5 billion in GMV in 2023, holding about 48% market share. Offering everything from electronics to fashion and fitness gear, Shopee ensures transaction safety with Shopee Guarantee. Its user-friendly interface, low fees, and innovative marketing draw users in.
Consumers might browse eight websites before buying, prioritizing value and sustainability. Payment preferences differ: 46% in Malaysia use bank transfers, 75% in Singapore prefer credit cards, and Vietnam’s digital payments are expected to grow 57% by 2025. With 90% mobile usage in Malaysia and Singapore, mobile-friendly experiences are critical. Strategies must adapt to each country’s economic and tech infrastructure.
Cultural Considerations for Success in Southeast Asia
Similar to the European Union, the Association of Southeast Asian Nations (ASEAN), established in 1967, promotes economic cooperation and integration to boost regional competitiveness. ASEAN’s core goal is fostering economic ties through trade agreements and policies. The ASEAN Free Trade Area (AFTA) and ASEAN Trade in Goods Agreement (ATIGA) have slashed tariffs, some to zero. Efforts to cut non-tariff barriers—like technical standards and sanitary measures—simplify trade. Infrastructure and logistics, like the ASEAN Highway Network and air transport agreements, improve connectivity.
Research shows ASEAN integration has spurred intra-regional trade. Per the Asian Development Bank (ADB), intra-ASEAN trade rose from 17.0% of total trade in 1990 to 25.0% in 2011, proving these policies work. Trade value jumped from $82 billion in 1993 to $598 billion in 2011. In 2023, ASEAN’s total exports hit $1.95 trillion, with intra-regional trade estimated at $429 billion (22%).
But, like the EU, while trade standards converge due to the alliance, market entry still demands attention to each country’s unique regulations, consumer habits, and cultural specifics. Here are some insights and suggestions:
Vietnam
Zalo is Vietnam’s popular social media and messaging app, offering messaging, voice, and video calls. To enter Vietnam, foreign e-commerce platforms must apply for a license from the Ministry of Industry and Trade (MoIT) and set up a representative office or designate a local legal entity. This ensures consumer rights and market regulation, with the representative verifying foreign sellers’ legitimacy and compensating for violations. The new VAT law, effective July 1, 2025, expands taxpayer definitions to include foreign e-commerce and digital platform suppliers, requiring 10% VAT (up from 5%).
Sustainability
Southeast Asian nations increasingly prioritize ESG issues, reflected in policies and consumer preferences. Businesses should factor ESG into product development and market entry. In Indonesia, 74% of online consumers favor sustainable brands, and 77% are willing to pay more for eco-friendly products.
Religious and Festival Marketing
For Muslim-majority nations like Indonesia and Malaysia, during Ramadan, consumer activity spikes at night, so ads should target evening hours. Avoid pork, alcohol, and ensure halal certification. Festivals like Hari Raya are gift-buying peaks—perfect for promoting gift items. In Buddhist-majority Thailand, Songkran (Thai New Year) drives purchases of water guns, travel goods, or elder gifts. During the Vegetarian Festival (Tesagan Gin Je), vegetarian products appeal to Buddhist preferences.
Cultural Taboos
In Thailand, a thumbs-up is offensive, akin to mockery—e-commerce ads should avoid it. White ties to funerals, so skip it for festive packaging. Indonesia and Malaysia favor vibrant colors, reflecting local aesthetics.
▲Picture's from eMagazine, copyright belongs to original authors
It’s Time to Shift the Way how Business are Done
The U.S. market is currently buckling under tariffs and trade disputes. However, as President Trump has indicated most recently, these tensions may be temporary, with the possibility of lower tariffs depending on China's actions. This suggests that the situation could improve soon, offering a glimmer of hope for businesses reliant on the U.S. market.
Yet, the disruptions serve as a stark reminder of the risks of depending almost entirely on one market. Just as relying heavily on a single platform or business model can be perilous, so too is tying your fate to a single country’s economic and political landscape. Healthy businesses thrive on diversification, and now is the time to turn these challenges into opportunities.
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