(The views expressed here are those of the author, the founder

and CEO of Emmer Capital Partners Ltd.)

By Manishi Raychaudhuri

March 19 - While the unfolding tariff war has many

similarities with Donald Trump's first trade skirmish in 2018 -

including levies on aluminium and steel and a "stop-go"

trajectory - that's where the resemblance ends. That could be

bad news for much of Asia.

First, the scale is far higher this time around, and more

countries are likely to come under the tariff net. In 2018, the

average tariff revenue of the U.S., as a proportion of goods

imports, increased from 1.5% to 2.9%, according to the Yale

Budget Lab. If all of the currently proposed tariffs are

implemented and remain in place through 2025, U.S. tariff

revenue would increase to 9.5%.

Additionally, the Asian countries likely to be most pressured by

U.S. tariffs today are different from those that were most

vulnerable in 2018 because trade relationships have shifted

meaningfully since then.

In 2018, almost 20% of China's exports were to the U.S. By 2024,

that figure was under 15%. China today exports much more to

ASEAN countries, Africa and Latin America than to the U.S.

However, almost every other Asian economy's export share to the

U.S. has increased considerably, though this is partly due to

trans-shipments from China. The most notable jumps were in

Taiwan (from 11.9% to 23.5%), Korea (from 12% to 18.7%),

Thailand (11.1% to 18.3%) and Malaysia (9% to 13.2%).

Moreover, trade surpluses with the U.S. have skyrocketed in

Korea and Taiwan. While China and Mexico still had the largest

surpluses with the U.S. in 2024 at $360 billion and $260

billion, respectively, Taiwan's and Korea's increased more than

any other country's.

AN EYE FOR AN EYE

The Trump administration is also planning to implement

reciprocal tariffs as of April 2, meaning tariffs on U.S.

imports from each country would match the tariffs on U.S.

exports imposed by that country. It remains uncertain how these

tariffs would be calculated and whether the U.S. will take into

account various non-tariff barriers and domestic taxes like

Value Added Tax (VAT) or Goods and Services Tax (GST).

The impact of reciprocal tariffs would differ significantly by

nation. Yale Budget Lab estimates that under reciprocal tariffs,

the Asian countries that could face the highest tariff increases

are India and China, at 17 and 13 percentage points,

respectively. (Of course, China has already been slapped with a

broad 20% tariff.)

The impact of reciprocal tariffs on Asian economies may also not

be proportionate to the size of the tax. India's exports to the

U.S. only represent 2% of GDP and China's only 2.8%. So even

double-digit tariffs increase would likely not make a huge dent

in their economies.

In contrast, exports to the U.S. constitute more than 10% of

Malaysia's GDP, so the 9.9 percentage point tariff increase

expected under reciprocal tariffs could take a big hit.

Similarly, Thailand, Taiwan and Korea could all see their

economies slow meaningfully if the proposed reciprocal tariffs

are implemented and prove durable.

EQUITIES: NEW WINNERS AND LOSERS

The 2018 trade war clearly impacted Asian equities more than the

U.S. market. From late January 2018, when the tariff war began,

to early January 2019, the S&P 500 Index declined by 15%, while

the MSCI Asia ex-Japan Index dropped by 25%.

Stocks in China and South Korea, the two largest Asian

exporters, suffered the most, while Indian equities, a

predominantly domestic market, were hurt the least.

In the latest trade skirmish, damage to Asian equity markets

could come from multiple sources: currency depreciation as

exports slump, domestic demand destruction as liquidity dries

up, or more directly as corporates highly exposed to U.S.

markets see revenues decline.

Importantly, corporate revenues in several Asian equity markets

are now far more reliant on the U.S. than they were in 2018. The

U.S. may have contributed only 4.7% to Chinese companies'

revenues in 2024, but compare that to 31.6% for Taiwanese

companies, 13.9% for the Japanese and 12.8% for Korean. India

isn't entirely safe either, with 7.9% revenue exposure to the

U.S., contributed largely by companies in technology services,

business process outsourcing and generic drugs.

LET MR. MARKET BE THE JUDGE

Since President Trump's second inauguration, the relative

performance of Asian equity markets has been very different from

what was seen in 2018. China, the laggard last time around, is

now the best performer, while Thailand, Taiwan, Malaysia and

India are among the worst.

So Mr. Market appears to have spoken, and he seems to be saying

that, in Asia broadly, the second Trump trade war will be

different - and potentially more painful - than the last.

(Manishi Raychaudhuri is the founder and CEO of Emmer

Capital Partners Ltd. and the former Head of Asia-Pacific Equity

Research at BNP Paribas Securities.)

(Writing by Manishi Raychaudhuri; editing by Anna Szymanski and

Ros Russell)