A World of Change: How Asia Is Adapting to Global Trade Disruptions

Tariffs. AI. Geopolitics. Trade in Asia saw major disruptions in 2025—and that can be unsettling. But it’s also important to remember what didn’t change: the progress of trade itself. According to recent research from the McKinsey Global Institute (MGI), US imports and Chinese exports both hit record highs in 2025, and intra-Asian trade deepened.

MGI addressed other trends, beneath the surface but powerful, that are reshaping Asian trade patterns. Among these are the growth in AI-related trade and the ongoing realignment with partners along geopolitical lines. Businesses everywhere will need to take note—and adapt.

In a sense, of course, when it comes to trade, “Asia” is a meaningless term. There are different Asias, each at its own stage of development, with its own story and its own strengths.

For example, in the wake of new tariffs, to replace goods it previously sourced from China, the United States turned to other suppliers, generally those with which it was more geopolitically aligned. India increased smartphone exports and ASEAN economies replaced about two-thirds of the value of US laptop imports that had come from China.

ASEAN economies also boosted sales of servers and networking equipment, which are required to build data centers. More broadly, ASEAN economies strengthened its position as a manufacturing hub, importing more inputs from China and exporting more finished goods to the United States. Indeed, ASEAN economies expanded trade with every region, with total manufactured exports jumping nearly 14 percent; Vietnam and Thailand led the pack.

China compensated for the drop in US trade by paying more attention to other markets. Exports to manufacturing hubs in emerging economies rose to nearly half of total exports in 2025, up from one-third in 2017. In addition, Chinese firms reduced their emphasis on consumer goods exports to the United States and instead increased its exports of intermediate inputs and capital goods by more than $175 billion, pushing its trade surplus to a record.

For India, the pattern was different. Although it shipped about half the smartphones US consumers would previously have bought from Chinese suppliers, its manufacturing and export footprint was otherwise little changed. But perhaps not for long. India recently signed a free trade agreement with the European Union, a pact that European Commission President, Ursula von der Leyen called “the mother of all deals.”

And for some of the most advanced Asian economies, such as Japan, South Korea, and Taiwan, the dynamics are different still. They stood out in AI-related trade, which is growing fast; exports of semiconductors and data-center equipment accounted for one-third of global trade growth. Taiwan supplies advanced logic chips. South Korea specializes in memory chips. Japan provides equipment and critical materials.

These economies also saw considerable growth in trade with other Asian markets. Taiwan’s trade with ASEAN grew by nearly 40 percent, largely in AI-related goods, while South Korea’s exports to ASEAN increased due to rising demand for memory chips and other components used in later stages of electronics assembly. As for Japan, it has been growing its non-Chinese exports, particularly to India. It has also imposed licensing restrictions on advanced semiconductor manufacturing equipment to China.

For ASEAN economies, itself a highly differentiated group, the opportunity is to continue to move upstream to become a global manufacturing hub—a trend that is showing considerable momentum. In January, Vietnam produced the largest trade surplus with the United States, overtaking both Mexico and China. For India, the challenge is to replicate its smartphone success and diversify its manufacturing base, while maintaining its position in IT and pharmaceuticals. For Japan, South Korea, and Taiwan, the priority is to scale up production fast enough to meet AI demand while managing downside risks.

And everyone needs to figure out how to navigate—and capitalize on—changing global trade patterns. It will not be possible to anticipate every tariff tweak. But some structural shifts, such as the race to build data centers and the growth of intra-Asian trade, are likely to persist Successful adaptation will require the nimbleness of a gymnast, to rebalance as conditions change, and the reflexes of a goalkeeper, to make the right move at the right time.

None of this will be easy. The opportunity, however, is at least as great as the difficulty. Despite the turmoil of 2025, in which US-China trade fell by 30 percent, China posted a record trade surplus of more than $200 billion in the first two months of 2026, well above market expectations. As Asian markets take on new roles, connecting global supply chains across a diverse geopolitical spectrum, it is that kind of resiliency that will determine future winners.

Gautam Kumra is chairman of McKinsey’s offices in Asia, based in Singapore. Jeongmin Seong is partner at McKinsey Global Institute (MGI), based in Tokyo. Tiago Devesa is Senior Fellow at the McKinsey Global Institute (MGI), based in Lisbon.