Businesses across Southeast Asia are adapting to evolving US trade policies and global uncertainty by diversifying export markets, strengthening regional supply chains and reducing logistics and customs costs, according to a report by the Economic Research Institute for ASEAN and East Asia (ERIA).

The report, Private Sector Insights on Navigating US Trade Policy: Findings from ASEAN Business Dialogues, said companies are pursuing regional clustering and digitalization while seeking markets beyond the United States.

One strategy is consolidating back-end operations such as packaging and testing in lower-cost ASEAN hubs, including Vietnam and Malaysia. ERIA said this could reduce logistics costs by 30 percent to 40 percent.

A chip shipped from Vietnam to China for packaging before returning to ASEAN for testing can cost $0.80 to $1.20 per kilogram and take three to four weeks. With regional clustering, the same chip could move by truck from Vietnam to Malaysia in about four hours at a cost of $0.10 to $0.20 per kilogram.

A more integrated ASEAN production base for investors

Clustering could also halve time to market and create a more integrated ASEAN production base for investors.

Businesses also see customs digitalization as critical to lowering administrative costs and speeding up trade. Digital submissions and automated validation could reduce clearance times from several days to less than an hour.

The ASEAN Single Window Steering Committee is also working on a roadmap for exchanging electronic documents with ASEAN dialogue partners.

ASEAN companies are likewise reducing their reliance on US demand by expanding into the European Union, Middle East, Africa, Latin America and intra-ASEAN markets.

Cambodia and Lao PDR are leveraging the EU’s Everything But Arms scheme for duty-free access, while Thailand and Vietnam are expanding exports to Europe and exploring opportunities under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Establish alternative production bases in ASEAN

The China+1 and US+1 strategies are also encouraging companies to establish alternative production bases in ASEAN. Vietnam and Malaysia are attracting electronics and semiconductor investments, while Indonesia is benefiting from its large workforce and competitive wages.