Warburg: US Tariffs in ASEAN – A Regional Impact
Vietnam Remains Competitive Despite US Tariffs, Says Warburg Pincus’s Perlman
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The US recently reached a tentative deal with Vietnam for a 20% tariff on exports, a notable reduction from the initially proposed 46%. While tariffs are being adjusted across Southeast Asian nations,Warburg Pincus’s Managing Director,Jeffrey Perlman,believes Vietnam is well-positioned to remain a competitive manufacturing hub.
Tariff Adjustments Won’t Eliminate Trade Deficits
Speaking from Hanoi in a Bloomberg TV interview, Perlman explained that simply adjusting tariff rates between countries won’t eliminate trade deficits. Instead, it’s likely to shift them. He anticipates some nations may negotiate lower tariffs with the US, particularly for products unlikely to be manufactured domestically.
“The tariff rates will probably be pretty close sitting on top of each other across a number of those markets,” Perlman stated.He emphasized that even with the 20% tariff, Vietnam remains “very competitive” and “well positioned” due to its established reputation for high-quality production.
The US sent letters to Thailand, Malaysia, and Indonesia on Monday outlining tariffs ranging from 25% to 40%, placing Vietnam at a relative advantage.
Warburg Pincus Doubles Down on Vietnam investment
Warburg Pincus, a major global private equity firm, has already invested over $5 billion in 28 companies across Southeast Asia, spanning financial services, healthcare, real estate, technology, and business services. Vietnam is a key focus, with approximately $2 billion committed to 8 companies. This significant investment underscores the firm’s confidence in the country’s economic potential.
Headwinds for Private Equity in a High-Rate Environment
Despite the positive outlook for Vietnam, Perlman cautioned that private equity firms globally will face ongoing challenges due to the current higher interest rate environment. He predicts these headwinds will persist as rates are likely to remain elevated for the foreseeable future.
Over-Expansion and Valuation Concerns
Firms that aggressively expanded, particularly those making acquisitions in 2021 at “very high valuations,” are expected to encounter significant difficulties. A “structural step up” in long-term rates, perhaps settling in the 4% to 6% range (compared to the previous 2% to 4%), will exacerbate these challenges.
Perlman suggests that as short-term rates potentially decline, the gap between asking and selling prices may narrow.This could compel sellers to accept lower prices to clear existing inventory.
–Whith is also a Patocillo from, Tandon Free sanone tires Sam Nakame.
(Updates with comments in last two paragraphs.)