Amid the Geostrategic Uncertainties, Firms Need the Reassurance of Business Continuity

The announcement of US reciprocal tariffs in April 2025 sparked off the volatility in global markets that has profoundly defined President Trump’s approach to US trade policy in his first year in office. Besides these uncertainties on the trade and investment policy front, other geopolitical tensions around and beyond the region have also placed additional operational pressures on businesses in Southeast Asia. Constituting 42.9 per cent of the State of Southeast Asia Survey 2026 (SSEA2026) sample, private sector players have been shown to have distinct interests and concerns relative to the nationwide average in some areas. These findings inform domestic public policies and regional initiatives, carrying an overarching message to strengthen operational resilience for firms in the region.

SSEA2026 results show that private sector respondents are more inclined towards events that are or can be potentially disruptive to business, especially in terms of supply chains and production capacities. Although the Cambodia-Thailand border conflict ranked fourth highest in most pressing geopolitical concerns amongst private sector respondents, the differences in respondent shares of the private sector versus the nationwide average across countries were observed to be most significant (Figure 1). This conflict has significantly reduced the availability of labour in Thailand in what has been described as an ‘unprecedented exodus‘ of Cambodian workers after the border conflict escalated in 2025. As expected, responses from the private sector and the nationwide average for the countries directly affected, Cambodia and Thailand, are similarly high. For several other Southeast Asian countries, with business interests in Thailand, such as Indonesia and Vietnam, the disparity with the nationwide average may be more apparent given the far-reaching impacts of the labour shortage stemming from migrant Cambodian workers who are involved across many labour-intensive industries, from agriculture to manufacturing and construction. Just as recently as December 2025, continued fighting prompted the Thai military to stop fuel imports into Laos at the border checkpoint on account of suspicions that these supplies were being diverted to Cambodia.

Another regional flashpoint of concern revolves around the ongoing geopolitical tensions in the South China Sea. In particular, private sector respondents express stronger sentiments towards risks of a direct military confrontation between the US and China (Figure 2). In the event of potential conflict in this region, vital shipping routes would be significantly disrupted, affecting an estimated 21 per cent of global trade and one third of overall global shipping. As the ongoing and escalating conflict in the Middle East has shown, major disruptions of integral waterways for natural resources and production inputs can have profound effects on the availability and affordability of necessities. Thus, risks that pose serious implications for business continuity remain in focus.

In response to how ASEAN should manage rising protectionism and nationalism, private sector players continue to stress the importance of accelerating regional integration to counter protectionism, constituting 42.8 per cent of responses. Moreover, the private sector lean of the respective countries towards this strategic stance is generally stronger than that of the nationwide average of the respective ASEAN Member States (AMS) (Figure 3).

Economic influence is not necessarily a positive factor but can be also seen in a more negative light… This nuance acquires an added importance in this year’s survey results given the slew of off-again-on-again tariff threats acutely affecting Southeast Asian countries.

The second most cited response of both these groups is to deepen cooperation with like-minded partners beyond ASEAN to counter protectionism. Although there is some momentum towards this stance by firms in highly open economies such as the Philippines, Thailand and Vietnam since 2025, SSEA2026 suggests that the private sector in these countries is less invested than the general population in deepening partnerships beyond ASEAN  (Figure 4). This may not be so surprising, seeing as private sector respondents have the most confidence in ASEAN to champion global free trade (26.2 per cent) and regard ASEAN marginally second to the US (24.0 per cent) in providing leadership to maintain the rules-based order (23.4 per cent).

This aspect can also be reflected in the sentiments expressed regarding China and the US. Although China is still considered the most influential economic power in the region by firms overall (52.5 per cent), respective country-level responses have moderated from 2025 levels. Conversely, the US, which stands as the second-most influential economic power in the region at 16.9 per cent amongst the private sector respondents, has experienced a positive shift in these sentiments over the past year. Comparing private sector respondents with the nationwide averages, there are discernible differences in sentiments with regard to perceptions of economic influence accorded to China and the US, respectively. In particular, private sector respondents in Laos (- 10.7 percentage points), Singapore (-10.2 percentage points), and Timor-Leste (-9.7 percentage points) felt less strongly about China’s regional economic influence compared to nationwide averages. Separately for the US, private sector respondents from the Philippines (+7.6 percentage points) and Singapore (+7.1 percentage points) expressed stronger support for the US as a regional economic influence relative to the nationwide average (Figure 5).

This brings into light an important aspect: economic influence is not necessarily a positive factor but can also be seen in a more negative light. That is, impacts on stakeholders could materialise both favourably or unfavourably. This nuance acquires an added importance in this year’s survey results given the slew of off-again-on-again tariff threats acutely affecting Southeast Asian countries, which have heightened business uncertainties while also elevating the costs of doing business. The sense among firms that the US possesses more economic influence in the region could be a reflection of how much US policies have affected business operations and decisions. The private sector’s level of anxiety towards the major powers’ growing economic influence is illustrated by the level of concern expressed over these developments (Figure 6). Compared to the nationwide averages, firms are noticeably more concerned with the growing economic influence of the US and comparatively less concerned about China.

Firms dislike operational disruptions and have emphasised the preference for deeper economic integration to mitigate these risks and challenges faced. The upgraded ASEAN Trade in Goods Agreement (ATIGA) has set out to address existing shortcomings that impede smooth trade and investment flows, and to resolve issues affecting supply chain connectivity as geopolitical tensions rise. Regional frameworks like these are useful, but domestic implementation and enforcement of the required provisions will be decisive in helping to alleviate the private sector’s pain points.

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