1 week Ago
President Donald Trump's tariff hikes, marking "Liberation Day", hit foes and friends of the US equally. The immediate effect is that Mr Trump has rallied the rest of the world to prepare for a future without US dominance. To put it mildly, they must become less dependent on the US in every possible way -- unless Mr Trump changes his approach.
No one can predict the unpredictable, as the current economic world and geopolitical environment are too complex for anyone to forecast. One thing is certain: After April 2, the US -- known as the world's most powerful country -- will not be as powerful as before, thanks to the ramifications of Mr Trump's disrupting tariff policy. President Trump predicts that his tariff policy will liberate his country and make the United States so powerful that Americans "become so rich we're not going to know where to spend that money".
History will be the judge. At the end of the day, no country can prosper alone at the expense of others -- in this case, "others" means over 200 countries across the globe. First of all, we need to understand the basis of Mr Trump's tariff policy.
According to the US Trade Representative's Office, each country's reciprocal tariff rate was based on the US trade deficit with that specific country, divided by the value of its exports to the US. Then, the total number was halved to show American "kindness". Last week, Mr Trump imposed a 10% levy on imports from around the world, along with extra tariffs on major trading partners.
Among the Asean countries, Cambodia and Vietnam hit the hardest at 49% and 46%, respectively. Thailand is among the so-called "Dirty 15" nations that have a trade surplus of US$43 billion with the US. Thailand-US trade has increased dramatically in recent years, especially during and after the Covid crisis.
The US is Thailand's largest export market, with electronics, machinery, and agricultural products topping the list. On average, the US tariff on Thai imports is 2%, while Thailand levies an average tariff of 8% on American products. The new rate is through the roof -- at 36%.
Since the announcement, the Paetongtarn government has stated that the country is ready for negotiation with Washington. She said that the country has a solid plan to deal with the Trump tariff. This week, a special negotiation team is heading to Washington for negotiations.
Indeed, the government set up a special task force for tariff negotiations with the US in January. Despite doing so, Bangkok's reaction is too slow in comparison to neighboring countries in the region. For instance, Vietnam, being hit with a 46% levy, among the highest, has already discussed the matter with Mr Trump.
In a tweet, Mr Trump said he had a very productive call with To Lam, Secretary General of the Communist Party of Vietnam, who told him that Vietnam is ready to reduce its tariffs to zero if an agreement can be reached. In addition, Vietnam is ready to expand its manufacturing capacity to attract companies affected by US tariffs. Furthermore, it has also offered subsidies covering up to 50% of R&D and workforce training costs in the semiconductor and AI industries.
Cambodia, which was slapped with a 49% tariff, also moved quickly to mitigate further economic impacts. Prime Minister Hun Manet wrote to Mr Trump pledging to reduce certain imports of US products from 35% to 5%. Laos received a 48% tariff and Myanmar 44%.
Given the current economic conditions of these countries, levy hikes will seriously impact their economic growth and development plans. The region's largest economy, Indonesia, was hit with a 32% tariff. While individual nations are proceeding with each negotiation plan, the Association of Southeast Asian Nations (Asean) is attempting to create a new regional market for members to trade in.
Malaysia, the current Asean chair -- which was hit by a 24% tariff -- is pushing Asean members to make substantial progress on the Digital Economy Framework Agreement (Defa), with Thailand playing a leading role in the DEFA negotiations. Asean is betting that Defa will boost intra-Asean trade, especially in semiconductors and electronics, which will become new catalysts for regional trade. Defa, the first of its kind in the world, is expected to triple the bloc's digital economy from US$300 billion to US$1 trillion by 2030.
As Malaysia prepares to host the 47th Asean-related summits from May 25–27, US unilateralism and rising protectionism will top the agenda. Prime Minister Anwar Ibrahim minced no words in stating that the US-imposed duties pose a major threat to the current global trade and investment system. Therefore, the upcoming virtual Asean Economic Ministers Meeting on Thursday will focus on the US reciprocal tariffs and Asean's response.
The ministers also plan to issue a joint statement expressing concern over the US's unilateral action. The bloc will reiterate its support for free and open trade under the World Trade Organization, which the US helped to set up back in 1948. It is expected to urge the US to reconsider the tariff schemes.
It is worth noting that US investment in Asean was the highest in 2023, amounting to US$74.4 billion. Most of this came from major US companies -- meaning the tariff hikes will ultimately raise prices for American consumers.
Truth be told, relocating manufacturing bases from Southeast Asia to the US to avoid tariff hikes is easier said than done. For the time being, the new Asean Community Vision 2045, to be announced in May, aimed at deepening the bloc's internal economic integration, will offer a roadmap forward for a more seamless Asean. The bloc has also upgraded its Asean Trade in Goods Agreement to include digital trade, decarbonisation, and the circular economy.
In response to the current US tariff policy, Asean must enhance its global value chain resilience with stronger domestic manufacturing and industrial capabilities. Mr Anwar reiterated that Asean will coordinate internally to form a collective voice and position in negotiating with the US. Each Asean member received different tariff hikes, with Singapore (10%), the Philippines (17%) and Brunei (24%) facing smaller increases than others.
Whichever step Asean takes in responding to perceived US unfairness and discriminatory action, the broader Asean-US relationship remains pivotal to stability and prosperity in this part of the world. Kavi Chongkittavorn is a veteran journalist on regional affairs..
