Asia-Pacific is facing a new era of trade turbulence that could knock countries off their long-term development path, warns a new UNDP report. Rising tariffs, fragmented global value chains, and mounting uncertainty are rewriting the rules of trade in one of the world’s most exposed regions.

The report, Disruption, Diversification, and Divergence: Adapting Development Strategy to a Shifting Trade Landscape in Asia and the Pacific, identifies three forces:

• Disruption. Tariff shocks are hitting Southeast and East Asia the hardest, followed by South Asia and the Pacific. Cambodia’s exports to the US could fall by 24%, Viet Nam and Fiji by 19%, and Sri Lanka by 15%.

• Diversification. Exporters are adjusting, but resilience depends on market exposure and product mix. China shows how adaptation can work. Between April and August 2025 its total exports grew 5.9% year-on-year, masking a 25% fall to the US (USD 57 billion) offset by an 11% gain to the rest of the world (USD 146 billion)

• Divergence. Not all countries can shift at the same speed or scale. Export growth differentials to the rest of the world versus the US climbed above 4% in China by August and stayed positive throughout in Japan, Korea, and New Zealand. They turned positive only recently in Malaysia and Singapore, while remaining negative in Indonesia, Pakistan, Thailand, and Viet Nam, reflecting continued dependence on the US and more limited capacity to recalibrate.

“The global economy is entering a new chapter of rising protectionism, shifting trade alliances, and deepening uncertainty,” said Kanni Wignaraja, UN Assistant Secretary-General and UNDP Regional Director for Asia and the Pacific. “For Asia-Pacific, one of the most trade-dependent regions, this turbulence is seismic. It is also a moment of choice for economic and social reform.”

The social toll could be severe. Only 54% of the region’s people have social protection, while more than 1.3 billion work informally with no safety net. These workers and the small enterprises that dominate export-led sectors are the first to fall when trade shocks hit. According to the 2025 AlTi Social Progress Index, over 60% of countries in the region are already stagnating or sliding backwards. Trade turbulence could further erode hard-won human development gains. 

In response, UNDP sets out a dual-track strategy:

• Track 1: Outward adaptation. Competing globally in this new context means diversifying, upgrading, and digitizing. The region cannot rely on old markets alone. Countries need to forge new trade relationships, strengthen regional ties, and climb higher up value chains. Early examples are visible. Viet Nam is using AI-enabled trade systems to seize new opportunities, while Bangladesh is reinforcing its textile sector through stronger backward linkages.

• Track 2: Inward resilience. Competitiveness abroad means little without resilience at home. This calls for stronger engines of domestic growth, wider social protection, and a workforce ready for the future. The report highlights adaptive safety nets, reskilling, and digital access for small businesses. Such measures can turn trade shocks into momentum for inclusive development.

The report’s central warning is to keep long-term development goals at the center. Trade turbulence should be treated as a catalyst for overdue reforms, not a distraction from long-term priorities. Countries are urged to boost external competitiveness, protect the vulnerable, stay anchored in their national development strategies and the SDGs, and deepen collaboration to confront challenges collectively. What will matter most is discipline in delivery. That will decide whether today’s shocks will undermine or advance long-term transformation.

“Trade turbulence is real, but the bigger danger is distraction,” said Philip Schellekens, Chief Economist for Asia-Pacific at UNDP. “Countries that keep their eyes on the horizon, while adapting outward and reinforcing resilience at home, will emerge stronger, fairer, and more future-ready.”

LINK TO THE REPORT:

Report is available here: https://go.undp.org/w6C.

NOTE ON DATA

Trade data as of 10 Sep 2025. Simulations based on tariffs in place as of 31 Jul 2025.

MEDIA CONTACTS

For more information or to request an interview, contact: 

• In Bangkok: aminath.mindha@undp.org

• In New York City: raul.de.mora@undp.org (+1 631 464 86 17)

DATA POINTS

 Recent trade data

• China’s exports between April and August 2025 grew 5.9% year-on-year, masking a 25% drop to the US (–USD 57 bln) and an 11% gain to the rest of the world (+USD 146 bln).

• Estimation shows that around USD 68–70 bln of China’s exports were redirected from the US to other markets between April and August 2025.

• The growth gap between exports to the rest of the world and to the US on a 12-month rolling basis shows China reorienting strongly, rising to +3.8% in May and +4.1% in August 2025. Japan (+0.9%), Korea (+1.3%), and New Zealand (+0.6%) all ended August modestly positive, having stayed above zero throughout the period. Singapore and Malaysia, after plunging below –3% in March, rebounded sharply to +1.9% and +1.7% by August. In contrast, Indonesia (–2.7%), Thailand (–1.9%), and Vietnam (–0.5%) remained negative through the summer.

Other trade data

• In 2023, the trade-to-GDP ratio (the share of exports plus imports in GDP) averaged 101% across the Asia-Pacific region (note: simple, unweighted average). Several countries including Cambodia, the Maldives, Mongolia, Nauru, Singapore, Thailand, and Viet Nam record ratios well above 100%.

• The region’s GDP-weighted average of the trade-to-GDP ratio is lower at 54%, which reflects the influence of large economies with sizable domestic markets that can better absorb external shocks but also points to the vulnerability of smaller economies with a narrower domestic economic base.

• The US share of Asia-Pacific exports has declined over time (e.g., Cambodia from 54% in 2000 to 30% in 2020), while the EU’s share has grown (e.g., Cambodia rose from 11% to 18.2%), and intra-regional trade within Asia-Pacific now constitutes the region’s largest trade flow.

• Asia-Pacific economies are deeply embedded in global value chains, with ASEAN countries notably upgrading regional supply chains. In 2023, value added components accounted for more than half of intra-ASEAN gross exports, exceeding 60% in half of ASEAN member states.

Other relevant data points

• The Asia-Pacific region is expected to account for 80% of global middle-class growth by 2034, led by India (920 million) and China (1.1 billion); however, realizing this market potential remains constrained by persistent market access barriers in both countries.

• Southeast and South Asian countries have attracted steady FDI inflows amid shifting global supply chains, with Singapore achieving an average annual net FDI inflows of 32.1% from 2020 to 2023, while Viet Nam, Indonesia, and Cambodia saw annual growth rates of 5.6%, 5.2%, and 3.2%, respectively.

• The top three sectors account for over 75% of total FDI inflows, with manufacturing dominating in Viet Nam (64.2%) and Indonesia (60.2%), while services such as finance, ICT, and real estate are becoming increasingly attractive to investors in Singapore, Cambodia, and Viet Nam.

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