With reciprocal tariffs set to reshape international trade dynamics, APAC businesses face unprecedented market volatility. They must proactively refine their commercial strategies – from pricing optimization to strategic partnerships – to mitigate immediate impacts and sustain profitability.
The recent escalation in tariffs across major global economies, has significantly elevated market volatility, disrupting long-term strategic plans for businesses across the APAC region. With the global trade environment becoming increasingly uncertain, Asian companies, particularly those in Southeast Asia, must swiftly adapt their commercial strategies to safeguard profitability and market position.
Here, we provide strategic guidance to APAC firms mitigating these complexities, helping them turn challenges into opportunities.
The rising tariff threat and its impact on APAC businesses
The concept of tariffs is not new; however, recent tariff measures have demonstrated a greater breadth and depth compared to those implemented previously. These are affecting a wider array of products and involving a larger number of countries. Countries such as Taiwan, South Korea, Vietnam, Thailand, and Malaysia, whose export shares to the US have significantly grown since 2018, are particularly vulnerable to these tariffs. On the other hand, China has consciously reduced its reliance on US exports since the previous trade war, somewhat mitigating its exposure to the current round of tariffs.
Yet, despite efforts to diversify trade partnerships and reduce dependency, the APAC region's economic reliance on the US remains substantial. The export share to GDP figures underscores this indirect risk: Vietnam’s exposure stands at 30%, Thailand at 13%, and Malaysia at 12%.
With total Asia exports to the US reaching approximately USD 1.3 trillion in 2024, dominated by critical categories such as electronics, machinery, vehicles, mineral fuels, and medical instruments, businesses must urgently reevaluate their commercial strategies.
Below, we highlight actionable short, medium, and long-term measures crucial for maintaining competitive advantage amidst escalating global tariffs.
Immediate commercial actions to navigate volatility
- Pricing optimization: Companies must carefully plan and implement price adjustments to pass through tariff-related costs effectively without eroding customer relationships. Clear, value-based communication is essential to justify price changes.
- Customer retention and loyalty: Maintaining loyalty through value-added offerings is critical. APAC firms must invest in enhancing customer experiences and providing tailored loyalty programs to retain key accounts amidst pricing pressures.
- Sales force effectiveness and lead generation: Equipping sales teams with detailed tariff knowledge, tailored battle cards, and value-selling tools will be vital. Companies must leverage Gen-AI and analytics to better understand customer price sensitivity and strategically communicate value propositions.
- Sales enablement and process efficiency: Streamlining sales processes through digital tools to measure customer price elasticity will help align sales actions with clear KPIs, protecting margins and optimizing profitability.
- Cost efficiency: Short-term cost efficiencies are paramount. Businesses must proactively renegotiate supplier contracts, prioritize partnerships with suppliers benefiting from favorable trade agreements, and engage in strategic hedging activities to manage currency and pricing risks.
Medium-term strategic adaptations
- Review of product offerings and segmentation: Businesses must analyze product portfolios to identify those most vulnerable to tariffs, adapting offerings and promotional strategies based on customer segmentation and price sensitivity analysis.
- Channel strategy optimization: Evaluating market focus and go-to-market (GTM) strategies to shift reliance away from heavily impacted channels and US-centric markets toward less vulnerable regions is critical.
- Product modification: Adjusting product designs or configurations to move them into more agreeing tariff categories or positioning them at premium levels where higher prices can be absorbed without significant resistance will be advantageous.
- Strengthening local footprint via strategic partnerships: Developing robust local partnerships with distributors can help bypass tariff impacts while simultaneously enhancing market penetration and local customer engagement.
- Supply chain diversification: Further integrating local supply chains or pursuing vertical integration can achieve cost efficiencies and help mitigate exposure to international tariff volatility.
Long-term resilience through structural shifts
- Brand development: Enhancing brand equity enables companies to leverage greater pricing power and maintain market share despite external pressures. Powerful brands can effectively command premium pricing, minimizing tariff impacts. Investments in marketing and consistent delivery of quality products and services will strengthen your brand trust and resilience.
- Business model reviews: Comprehensive reviews of business models ensure sustained adaptability in the face of future volatility, focusing on diversification, digital transformation, and efficiency enhancements. APAC businesses must adopt flexible operating models to allow for rapid scaling or downsizing in response to tariff fluctuations, ensuring sustained competitiveness.
- Relocation and joint ventures: Consider strategic relocation or joint ventures in lower-tariff regions. This strategy provides a buffer against tariff exposure while opening new market opportunities. Additionally, joint ventures provide access to local expertise, easing market entry and compliance with local regulations.
- Automation and AI: Long-term investments in automation and artificial intelligence can enhance operational efficiencies, reduce costs, and bolster competitive positioning amidst rising tariffs and global competition. With AI-driven analytics, APAC businesses can gain real-time market insights and predictive capabilities, enabling proactive rather than reactive responses to tariff-related disruptions.
- Talent and workforce development: Companies in the APAC region must prioritize investment in robust training and development initiatives to secure the skilled workforce required to manage complex international trade dynamics. A skilled, agile workforce is essential for swiftly implementing strategic changes, fostering innovation, and maintaining competitiveness.
How Simon-Kucher can support your business
Navigating global tariff volatility demands immediate, targeted commercial actions combined with long-term strategic foresight. APAC businesses that embrace proactive, tailored commercial excellence strategies will not only withstand the current global tariff environment but will also emerge stronger and better positioned for sustainable growth.
As the world's leading growth advisory firm with a strong APAC presence, including our hub in Singapore, Simon-Kucher combines local insights with global expertise. Our industrials sector experts tailor commercial strategy optimization, pricing excellence, and market entry strategies specifically to APAC market dynamics.
To learn more about how we can help you to swiftly adapt to tariff-induced market disruptions and ensure sustainable competitive advantage, speak to us today.
