Risks for US Businesses in Emerging Asian Markets in 2024

Posted by Written by Abhishek Dey and Melissa Cyrill Reading Time: 11 minutes

We look at how US businesses in key emerging Asian markets in 2024 are set to be impacted by multiple geopolitical risks, ongoing supply chain shifts, and local elections.

In 2023, the global economic landscape witnessed a convergence of pivotal events and challenges forcing businesses to rethink strategies and de-risk operations – especially US companies based in Asia.

From political developments and conflict in the Middle East, to supply chain disruptions and monetary policy shifts, US businesses are navigating through a myriad of uncertainties and risks.

In this article, we discuss some of the key factors influencing US business operations in Asia in 2024, delving into the implications of regional elections, geopolitical tensions, the impact of US economic policies on Asian currencies, and climate change and sustainability risks.

Elections in prominent Asian markets in 2024

At least 64 countries and the European Union, representing a combined population of about 49 percent of the people in the world—plan to hold national elections in 2024, the results of which could prove highly consequential for many US businesses and multinational corporations.

In this packed electoral year, four nations in Emerging Asia are either scheduled to or have already held elections. These votes carry significant consequences for geopolitics, particularly in the case of Taiwan, and hold potential implications for the long-term economic reform trajectories of countries like India and Indonesia.


Lai Ching-te of the Democratic Progressive Party (DPP) won the January 13th election in Taiwan, maintaining the party’s pledge to uphold Taiwan’s political independence and the status quo in relations with China. However, despite the DPP’s return to power, they have lost their majority in the legislature, leading to a fragmented political landscape.

Lai Ching-te is expected to continue the policy settings of the outgoing Tsai Ing-wen administration but maintaining the status quo could lead to further deterioration in cross-strait ties. Under DPP rule, China’s incursions into Taiwan’s claimed maritime and air territory have escalated, accompanied by economic sanctions on the island.

Prolonged tensions between Taiwan and China may pose challenges to the island’s business climate and medium-term growth outlook, exacerbated by demographic headwinds. Additionally, the potential impact of aggressive actions by China, or the US in the defense of Taiwan, could affect market sentiment and risk perception in the region for US businesses.

Per reporting in the SCMP, US investments in Taiwan surged to US$932 million in 2023, a significant increase from US$398 million in 2022, marking the highest single-year total since 2008. The co-ownership of Taiwanese companies by American entities is believed to facilitate the expansion of production lines and manufacturing capabilities for these firms in the United States. In recent years, Taiwan, renowned for its technology sector, has found itself caught between mainland China and the US, both significant purchasers of its exports. Tensions have risen as the two powers engage in disputes over supply-chain ‘decoupling’. Amid these geopolitical risks, US firms appear to be establishing strategic partnerships with Taiwanese suppliers and manufacturers to secure supply of critical components. The small East Asian economy is a behemoth in the high-tech sector, contributing to 60 percent of the world’s supply of semiconductor chips.


The election in Indonesia took place on February 14th, and according to quick vote counts done by private pollsters, Prabowo Subianto is expected to win. Under Prabowo, the country is anticipated to maintain current president Jokowi’s strategy of economic transformation, focusing on infrastructure advancement and the down streaming of its resource-abundant sectors, in alignment with his commitment to upholding Jokowi’s legacy. Certain promises made during Prabowo’s campaign, if implemented, may pose a medium-term fiscal risk to the economy.

Prabowo’s presidency may bring uncertainties to the political and economic relations between Indonesia and the US. Concerns over human rights abuses and authoritarian tendencies in Prabowo’s past could strain diplomatic ties, leading to cautious engagement between the two countries. Economic relations, which are significant for both nations, might also see changes under Prabowo’s leadership, with potential impacts on trade, investment regulations, and market access. The US may seek assurances on issues like intellectual property rights and fair competition to maintain a favorable environment for American businesses in Indonesia.

According to the Office of the United States Trade Representative (USTR), US foreign direct investment (FDI) in Indonesia (stock) was US$11.9 billion in 2022, a 7.0 percent decrease from 2021, and mostly directed at mining, manufacturing, and non-bank holding companies. The Indonesian government under outgoing President Joko Widodo has over two terms prioritized corporate reforms, disciplined macroeconomic policies, development of the downstream commodities sector, infrastructure modernization, and leveraging Indonesia’s abundance in natural resources.


India is anticipated to hold elections in April-May, although the exact dates have not been announced yet. It is widely expected that the current government led by Narendra Modi will secure victory with a comfortable majority, largely attributed to the country’s strong economic performance and social cohesion around the Hindu faith. Modi’s potential reelection for a third term is predicted to ensure policy stability, emphasis on ease of doing business, and continuity of reforms, which would be reassuring for US investors and businesses.

The US is India’s largest trading partner and the largest export destination while India is the 9th largest trading partner of US. The US is also the third largest contributor of foreign direct investment (FDI) in India. The India-US economic partnership is broad-based and multi-sectoral, covering trade and investment, defense and security, education, finance, energy, science and technology, IT, pharmaceuticals and biotechnology, civil nuclear energy, environment, renewables, space technology and applications, healthcare, and research & development.

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Prime Minister Sheikh Hasina’s Awami League party won a historic fifth term in office amid low voter turnout and with the opposition Bangladesh Nationalist Party (BNP) led by former PM Khaleda Zia boycotting the vote. Washington DC had registered protest at what it termed ‘unfair’ elections in Bangladesh while India enjoys warm ties with the Sheikh Hasina government. This could create some risks for US businesses in Bangladesh.

According to the World Bank, the Bangladesh economy faces various challenges as inflationary pressures weigh down private consumption, import restrictions continue, foreign exchange reserves are likely to remain low, and overall conditions impede private investment. Public investments, however, remain positive per the World Bank, which predicts Bangladesh to grow at 5.6 percent in FY 2023-24.

The US holds a 17.5 percent share of Bangladesh exports and US FDI in Bangladesh is over US$4 billion. Dhaka wants to diversify sectors receiving FDI. Currently, gas and petroleum account for 70.9 percent of US FDI while textile and clothes received just 3 percent, as per 2023 data.

US businesses have pointed to existing challenges in the Bangladesh investment environment, namely profit repatriation, intellectual property rights, data protection act and logistics services. Big prospects lie in Bangladesh’s sectors of healthcare, education, and ICT.

US election is ‘X’ factor too

Meanwhile, the upcoming American election in November is poised to have a significant impact on the global economy, particularly in Asia. The outcome of the election will shape the economic and regulatory policies adopted by the incoming administration. While stability is anticipated in the event of a re-election of the Joe Biden administration, there is a higher level of uncertainty surrounding a possible Donald Trump presidency. The latter could heighten risks and negatively affect market access for and competitiveness of US firms.

The Trump campaign has suggested implementing a universal tariff of 10 percent on nearly all imported goods if they win the election. Additionally, they propose imposing an extra punitive tariff of 60 percent on products originating from China. Such measures could significantly disrupt trade between the US and China and have major repercussions for the global economy. Further, a Trump tendency towards altering traditional geopolitical alliances could strain relations with key allies and create an environment of mistrust for US companies conducting business. This scenario could see increased scrutiny over their supply chains, along with potential challenges in securing government contracts or accessing key incentives.

Supply chain disruption

In 2024, US businesses are grappling with significant supply chain disruptions stemming from various factors, including geopolitical tensions, trade conflicts, and global events. These disruptions have reverberated across industries, impacting operations, logistics, and profitability. Here are two key trends potentially affecting supply chain this year:

Chinese factor

US companies are increasingly cautious about manufacturing in China due to ongoing trade tensions, prompting them to explore diversification options. Many are reducing reliance on Chinese suppliers, viewing their dependencies with apprehension. Factors contributing to increased Chinese supply chain risk include the US-China trade war, the experiences of black swan events like the COVID-19 pandemic, and geopolitical instability. Countries like India, Mexico, and Vietnam are emerging as leading alternative manufacturing destinations, leading to the rise of concepts like near-shoring and friend-shoring. Mexico has even surpassed China as the United States’s top trade partner.

According to a survey by the US-China Business Council, 84 percent of respondents stated that US-China relations affected their business in China, with 31 percent developing new supply chains in response. Chinese supply chains have also been impacted by US government sanctions on China companies. In October 2023, the Bureau of Industry and Security (BIS) of the US Department of Commerce announced that it added 42 Chinese entities to the Entity List “for providing support to Russia’s military and/or defense industrial base” – making it harder or near impossible for them to do business with the US.

Despite these risks, rising export restrictions, and additional licensing requirements, China remains dominant in the technology and electronics industry. However, US businesses are advised to build resilient supply chains capable of withstanding disruptions.

The Uyghur Forced Labor Prevention Act

From a business risk perspective, the enactment of the Uyghur Forced Labor Prevention Act (UFLPA) since June 21, 2022, presents notable implications for MNCs. The UFLPA establishes a rebuttable presumption regarding goods originating from the Xinjiang Uyghur Autonomous Region (XUAR) or produced by specified entities, implicating them as products of forced labor and thereby subject to import prohibition within the United States. This legislation has increased regulatory scrutiny and makes it imperative for businesses to ensure transparent and ethical supply chains. In fact, in mid-February, the Financial Times reported that thousands of Volkswagen vehicles – including Porches, Audis, and Bentleys – had been impounded at US ports by Customs and Border Protection authorities due to issues over China sourced car parts. The company has reportedly launched an investigation over the origin of the ‘electronic component’, which may have been implicated due to “an indirect supplier further down its supply chain”. (See the UFLPA Entity List here.)

Red Sea crisis

Currently, the supply chains in the Red Sea are facing significant disruptions largely caused by Houthi rebel attacks on cargo ships and tankers using drones, airstrikes, and speedboats since November 2023. As a result, major shipping companies have ceased operations in the region, compelling vessels to redirect their routes southward, bypassing the Cape of Good Hope. This diversion leads to extended travel durations and heightened costs. The most impacted route among them is the one connecting Asia to Europe, where prices have skyrocketed by five folds, as reported by JP Morgan.

Approximately 30 percent of global container trade passing through the Suez Canal is affected by this disruption. Overall, the disruptions in the Red Sea region have impacted global trade, causing delays, rerouted shipments, and higher operating costs across various industries, from manufacturing to retail.

Geopolitical factors

In 2024, geopolitical risks are significantly impacting US businesses, reshaping their strategies and operations in response to a rapidly changing global landscape. Several key geopolitical factors are influencing these risks:

US-China relations

A number of unresolved conflicts and competitions will be sources of geopolitical risk in 2024. China’s increased military presence in the South China Sea, technological advancements, and ongoing trade rivalry with the US have heightened geopolitical tensions. Despite the tensions between the two countries, their bilateral relationship is multi-faceted, including trade, supply chain, and economic ties. Any drastic decoupling will severely impact both economies given their trade and commercial exposure to each other’s markets.While both countries aim to compete responsibly, the risk of escalating tensions remains. In recent weeks and months, Chinese and US government representatives from the foreign ministry, finance, and defense departments have met at various public forums to underscore this point. The USTR also extended the exclusions from China Section 301 tariffs, initially set to expire on December 31, 2023, to May 31, 2024. Leaders of the two countries – Biden and President Xi Jinping – last met in November at the Filoli Estate in San Francisco.

Trade tensions first escalated between US and China in 2018 when the US imposed tariffs on Chinese imports to address its trade deficit, under then President Trump. Talks broke down in May 2019 but resumed with the signing of the Phase One trade deal in January 2020. However, restrictions on exports to China, particularly in technology, persist due to concerns about intellectual property, contributing to ongoing trade tensions.

Additionally, overlapping interests and conflicts, such as China’s threats to sell US Treasury bonds and US blacklisting of Chinese technology companies, add to the complexity. There is growing concern that trade tensions could escalate into further financial decoupling, causing disruption to global financial markets. For more comprehensive reporting on this, read our US-China tracker here.

Middle East crisis

The ongoing tensions in the Middle East have highlighted the underlying conflicts between Iran and its allies, and the United States and Israel, raising fears of a potential escalation in violence within the region. Against the backdrop of Iran’s ongoing uranium enrichment activities and the relatively restrained responses from Sunni Arab states, there are heightened concerns about increased risks to commodity prices and trade routes. More recently, there have been concerns over Iran’s supposed support of Houthi rebels terrorizing shipping chokepoints.

Asian countries are particularly vulnerable to commodity price volatility, especially in hydrocarbons, and disruptions to trade routes in the Middle East. Given their heavy reliance on imported energy resources, such as oil and natural gas, from the area, any disruptions in the Middle East region can have significant repercussions on Asian economies, negatively impacting American business operating here.

Russia-Ukraine war and US Entity List

The onset of the war and the ensuing sanctions have disrupted direct supply chains with Russia and Ukraine, as well as supply chains via Russia to Asia. Consequently, prices for various raw materials, energy, intermediate products, and transportation services have surged significantly. Moreover, in response to Moscow’s continued aggression in Ukraine and the death of opposition leader Alexey Navalny, the US has imposed sanctions on more than 500 Russian-linked targets and imposed new export restrictions on nearly 100 entities for providing support to Russia. Compliance with US sanctions presents a significant challenge for businesses, including US-headquartered MNCs, particularly in terms of identifying affected business partners, product groups, and services, and adhering to import and export controls. Failure to comply with sanctions regulations could lead to severe criminal penalties for companies and their management.

The Export Administration Regulations (EAR) include the Entity List, which enumerates foreign entities such as businesses, research institutions, and individuals subject to specific license requirements for exporting, reexporting, or transferring specified items. These entities, detailed in Supplement No. 4 to Part 744 of the EAR, are subject to individualized licensing requirements and policies, in addition to those outlined elsewhere in the EAR. (See here for the US Entity List.)

US Federal Reserve

The Federal Reserve is expected to cut interest rates later in 2024, potentially benefiting certain Asian currencies, such as the Chinese yuan, the Indian rupee, and the South Korean won. A weaker US dollar resulting from the rate cuts could bolster these currencies.

As per a report by Swiss Re, several additional Asian nations, including Japan and Vietnam, are anticipated to increase their interest rates, while others such as Australia and Singapore are projected to uphold stringent monetary policies. This discrepancy among US and Asian countries is due to the fact that Asia-Pacific central banks aren’t necessarily mirroring the US Fed’s rate cuts this year. Instead, they are tailoring their monetary policies to address local inflation pressures and boost growth.

Climate change and sustainability risks

In 2023, record-high temperatures marked the hottest year on record, with El Niño conditions expected to exacerbate warming trends. Analysts predict escalating economic and financial costs from adverse health impacts across the world, including risks like infectious diseases and water scarcity, affecting health systems and productivity. Across Asian markets, and indeed even in the US, transition to low-carbon emissions has been uneven with hesitancy regarding sustainability risks and opportunities. At present, progress is primarily driven by government incentive programs, private sector enterprises pursuing ESG-related compliances, and start-ups. US companies with export-oriented production bases in Asian countries will also need to prepare for greater environmental safeguards, carbon emissions tracking, and carbon taxes in Western markets. For example, the EU’s Corporate Sustainability Reporting Directive, effective mid-2024, increased climate disclosure compliance in the US, etc. Presently, a California legislation mandates large companies to disclose greenhouse gas emissions, effective 2026, necessitating early preparation for carbon footprint tracking.

Final takeaways

Geopolitical tensions, compounded by the global pandemic and disparities in globalization’s benefits, are reshaping US economic policies and igniting debates on the value of unrestricted free trade. Protectionist measures, such as actions to secure supply chains, friend-shoring, and near-shoring, alongside retaliatory tariffs, are increasingly prevalent, affecting US relations with both allies and unfriendly nations. These developments pose various risks for US companies operating in key emerging markets, particularly in Asia, impacting sectors and supplier networks differently, leading to increased costs, uncertainties, and invisible barriers in government contracts bidding.

Preferred terms are infiltrating trade agreements and diplomatic negotiations, notably with ‘friendly’ markets, forming sector-specific trade blocs. Retaliatory actions like counter tariffs and export restrictions heighten risks for US firms connected to Asian markets. Trade relations with China, crucial for US economic stability, face new uncertainties in 2024. If there are changes in executive control next year, following the November polls, it will test US’ diplomatic relations with Asian allies who are also having to manage China’s economic, technology, and strategic ambitions, and in their backyard.

Moreover, amidst global trade fragmentation and the urgent need for climate action, environmental considerations are gaining importance for US enterprises in Asia, offering opportunities for growth or reconsideration of priorities. However, challenges such as supply chain disruptions, resource competition, increased costs, compliance, and reputational risks persist – often putting the brakes on sustainability policies. Companies must comprehend overall business implications, prepare for contingencies, and mitigate operational risks to ensure survival and bottom-line growth.

As Asian markets stay dynamic in 2024, companies need to be more adaptive to capture both demand and secure stability. Digital tools and data analytics will be key investments in this regard, as corporate strategies will be forced to be nimbler and respond more frequently to bouts of acute crises.

About us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in India.

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