Illustration: Chen Xia/GT

With Washington's August 1 tariff deadline at hand, developments regarding trade agreements and frameworks between the US and several Asian economies have sparked concerns about the potential rise in the costs of Asian manufacturing exports to the US. In light of the increasingly uncertain external market, the imperative to foster intra-regional markets, particularly through the China-ASEAN Free Trade Area, ASEAN Plus Three countries, and Regional Comprehensive Economic Partnership (RCEP) frameworks, has become more pressing than ever. 

In an interview with Fox News on Wednesday night, US Commerce Secretary Howard Lutnick said that the US has reached trade agreements with Cambodia and Thailand. The two countries each face a tariff rate of 36 percent from August on their exports to the US, according to Bloomberg.

Trade talk results with several Asian economies including Japan, South Korea and Indonesia have already been announced by the US. These economies within Asia's industrial chain will encounter higher tariffs on exports to the US. The increase in tariffs is expected to lead to a rise in the cost of Asian manufacturing exports to the US, a challenge that cannot be underestimated for the region's manufacturing exports. 

For years, many Asian nations have relied on low-cost labor and well-established industrial support systems to become vital global manufacturing hubs, with exports to the US playing a significant role in their economies. Now the essence of the US tariffs is intended to reshape the trade pattern by eroding Asia's long-standing export advantages. 

Rising export costs will squeeze corporate profits and disrupt supply chains, potentially leading to production cuts or relocation, which could have far-reaching implications for the region's economic landscape. Under such external pressure, if Asian countries still rely excessively on external markets, they will face huge economic risks.

Therefore, the necessity of promoting Asian economic integration and building a robust internal market has become increasingly prominent. Asian countries share close economic ties and exhibit significant complementarity. When combined with the vast population base and the rapidly growing middle-class demographic in the region, there is a substantial opportunity for the expansion of the internal market. 

Asia is home to nearly 60 percent of the global population, with a rapidly expanding middle class, representing a consumer market with enormous potential. Yet, this potential remains largely untapped due to issues like uneven development among countries and wide income disparities, which restrict market expansion. To address this, enhancing endogenous dynamism is crucial. Stronger internal dynamism implies more stable and sustainable economic growth, rising personal income levels, and increasing consumption capacity, forming a powerful internal consumption driving force.

Industrial upgrading is the cornerstone of enhancing endogenous driving force. Given the diverse resource endowments and varying stages of development among Asian countries, industrial upgrading presents a unique opportunity for these nations to leverage their complementary advantages and foster coordinated development. Within the frameworks of the China-ASEAN Free Trade Area, ASEAN Plus Three countries, and the RCEP, these countries can collaborate more effectively, sharing best practices and technologies that facilitate industrial transformation. 

In particular, regional cooperation in promoting agricultural modernization, digitalization, and green transformation represents important efforts to enhance the internal drivers of Asian countries. These areas can not only create new economic growth points but also promote the optimization and upgrading of the regional economic structure. For instance, digital cooperation can break geographical barriers. 

Building a regional digital payment system, promoting the interconnection of cross-border e-commerce platforms, and formulating unified data governance rules can create more market opportunities for small and medium-sized enterprises and foster new forms of the digital economy. Green transformation cooperation can not only address the challenges of climate change but also give rise to strategic emerging industries such as new energy and energy conservation and environmental protection, injecting impetus into the regional economy.

Facing the challenges of trade chain restructuring, Asian countries need to take the initiative to build a new development pattern supported by the internal consumer market. When Asian countries can effectively translate economic growth into personal consumption, adding to the results of regional collaboration and market opening, a truly resilient and prosperous Asian consumer market is bound to become the most dynamic growth pole in the global economic landscape.