The impact of tariff uncertainty for Asian exporters

Receivable Management

The United States, the world’s largest economy and consumer market, ¹ has introduced tariffs on over 180 countries and territories. The average US tariff rate has climbed to over 20%, a level not seen in over a century. This has created significant challenges for global trade.

The global business environment is experiencing difficult times. Companies around the world are facing challenges associated with shifting economic and geopolitical alliances, and unpredictable trade policies. One source of uncertainty is the United States’ constantly shifting stance on tariffs. For exporters to succeed in this environment, they must understand the risks involved, how they can impact the credit risk profiles of their US customers, and how they can adopt protective measures.

Asian exporters are especially vulnerable to these risks because the region is home to nearly half of the US’s largest trading partners.²

Impact of Tariffs on Credit Risk

In addition to the impact that the tariffs will have on the credit risk to an exporter's customers, what other impacts can these tariffs have on the credit risk profiles of Asian exporters themselves? Higher costs make their goods less competitive in the US market. At the same time, the uncertainty surrounding future trade policies and the Trump administration’s indecision on tariffs, ³makes it hard for businesses to plan ahead.

According to Atradius Chief Economist John Lorié, tariffs not only increase trade costs but also reduce business confidence. "Tariffs raise the cost of trade, effectively lowering demand for traded goods, and hamper trade growth," explains Lorié.

As demand drops, companies face shrinking markets for their products. This uncertainty hinders businesses’ ability to adapt and increases their exposure to risks.

Rising tariffs also lead to higher risks of non-payment by their customers. Many trading partners struggle to manage disrupted supply chains, which can result in delayed or missed payments, and increased costs. Insurance industry surveys suggest that claims from payment defaults are likely to rise, further straining the trading environment.

Other Risks and Emerging Opportunities

In addition to tariff uncertainty, yet another major risk Asian exporters face is currency fluctuations, which hurt exports by introducing uncertainty in pricing and revenue, and can impact profit margins.

However, not all outcomes of US trade policies are negative. For instance, the global trend of "de-dollarisation" is growing. Some countries, such as China, Russia and India, are exploring trade in their own currencies instead of relying on the US dollar making trade with these countries more efficient and accessible.⁴ This may offer new opportunities for Asian exporters to expand trade with non-US partners.

Another opportunity lies in the realignment of supply chains. Many companies are diversifying their production hubs to countries like Vietnam, Malaysia, Indonesia in Southeast Asia, and India.⁵ This trend could attract foreign investment and create new markets for businesses in these nations.

How Asian Exporters Can Stay Resilient

With the global trade environment likely to remain uncertain due to tariffs, political tensions, and economic challenges, Asian exporters should adopt a multi-faceted approach to risk management. Key strategies include:

1. Market Diversification: Reduce reliance on the US by exploring new and lower-risk markets. This can help exporters mitigate the impact of economic fluctuations, trade policies, and geopolitical tensions that may affect a primary market.
2. Supply Chain Management: Source materials from multiple suppliers and evaluate local production options. Exporters can reduce dependency on any single source and mitigate risks associated with supply chain interruptions.
3. Currency Risk Mitigation: Monitor currency trends and use hedging strategies to minimise the impact of exchange rate fluctuations. Implementing hedging strategies, such as forward contracts and options, can help lock in favourable exchange rates and minimise financial risks associated with volatile currency movements.
4. Leverage Free Trade Agreements or regional agreements: Utilise existing and new free trade agreements that can provide tariff relief and open up new markets. The recent ASEAN agreement provides a stable and supportive environment for diversifying production hubs within ASEAN countries. Similar initiatives are being undertaken across Asia to strengthen regional trade and economic cooperation.
5. Invest in Innovation: By investing in advanced technologies and sustainable practices, they can enhance product quality and appeal, making their offerings more competitive in the global market and reducing costs at the same time.

With increasing uncertainty surrounding tariffs and the economy, businesses in global trade will find credit insurance to be an effective means of protection. It offers protection against non-payment of invoices, ensuring businesses can maintain cash flow, reduce exposure to bad debts, and protect their bottom lines. Additionally, it provides insights into the creditworthiness of trading partners, enabling companies to diversify into new markets or expand new customer relationships and grow with confidence even in uncertain times.

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¹https://www.visualcapitalist.com/americas-19-trillion-consumer-economy-in-one-chart/

²https://www.usnews.com/news/best-countries/articles/which-countries-are-the-biggest-u-s-trade-partners

³https://www.reuters.com/markets/global-markets-volatility-graphic-2025-04-10/

⁴https://www.jpmorgan.com/insights/global-research/currencies/de-dollarization

⁵https://www.mckinsey.com/industries/logistics/our-insights/diversifying-global-supply-chains-opportunities-in-southeast-asia