In the complex network of global trade, small and medium-sized enterprises (SMEs) specializing in auto parts, located in the industrial heartlands of Japan and South Korea, are expected to experience the repercussions of US tariffs. Although these firms may not be widely recognized by the public, they play an important role in the supply chain, producing essential components for vehicles bearing the logos of Japan's Toyota, South Korea's Hyundai and America's General Motors (GM), as reported by the Straits Times on Sunday.

Washington's auto tariffs, which went into effect on April 3, have the potential to upend a crucial American industry and raise the cost of tens of millions of cars sold every year across the country, CNN reported. This measure is also expected to disturb the global supply chain and affect the Asian auto industry. A significant number of suppliers that have been integral to the global auto industry chain are located in the region. The Straits Times provided an example - Benda Kogyo, founded in 1964 in Kure, Japan. This company not only exports directly to the US but also supplies GM's factory in South Korea. Its president, Kazunari Yashiro, expressed concerns in the interview.

The US tariff policy could exert pressure on the Asian supply chain, especially for countries and regions that consider the US an important export market for cars and auto parts. For instance, as reported by the Yonhap News Agency, cars are South Korea's top export item to the US. In 2024, auto exports to the US reached $34.7 billion, accounting for nearly half of all South Korean vehicle exports.

In these countries and regions, concerns over US auto tariffs are understandable. There's a possibility that external pressures will also compel companies in these areas to seek new opportunities. The auto supply chain in Asia is marked by strong complementarity, presenting substantial opportunities, especially during the shift toward electric vehicles (EVs). While US auto tariff policies have affected the global industry, the internal market in Asia remains vast, providing new opportunities for growth in the auto sector.

Additionally, the vehicle market in Southeast Asia is rapidly growing, with countries like Indonesia and Malaysia implementing policies to support the development of the industry, particularly in the EV sector. According to an EY-Parthenon analysis, Southeast Asia's total EV sales volume is forecast to be about 8.5 million units by 2035.

Thanks to favorable government policies and increasingly positive consumer sentiment toward EVs, the EV market of six Southeast Asian countries - Indonesia, Malaysia, Thailand, Vietnam, the Philippines and Singapore - is expected to see rapid expansion. Potential annual sales opportunities for EVs are estimated to hit a whopping $80-$100 billion by 2035, according to the EY-Parthenon analysis.

The Regional Comprehensive Economic Partnership (RCEP), by reducing tariff and non-tariff barriers, creates favorable conditions for establishing a unified market and collaborative supply chains within the region. This is expected to help reduce trade costs and promote collaborative development within the regional industrial chain. Although the negative impacts of the US auto tariff policy are expected to continue affecting the Asian auto industry, if the sector can fully leverage the potential opportunities in the Asian market, it is anticipated to provide the necessary support for the industry chain that is currently under pressure.

Tapping into the potential of the Asian market, particularly in the EV sector, presents numerous opportunities for countries to explore. One area of growth is the development of infrastructure including charging stations, which can benefit local enterprises across various markets.

In light of the external pressures stemming from US tariffs that affect the global automotive industry, successfully engaging with the Asian market requires collaboration among multiple stakeholders. By enhancing communication and coordination, and fostering continuous innovation, participating parties could better navigate challenges, ultimately strengthening the competitiveness and resilience of the regional market and industrial chain.