Relief in Southeast Asia as Trump's tariffs level playing field

Reuters

Southeast Asian nations expressed relief on Friday after the United States imposed tariffs on their exports that were significantly lower than anticipated- settling around 19% for the region’s largest economies and helping level the competitive field.

President Donald Trump’s sweeping global tariff campaign had caused concern across Southeast Asia, a region heavily dependent on exports and manufacturing, much of which has benefited from supply chain shifts out of China.

Countries such as Thailand, Malaysia, Cambodia, Indonesia, and the Philippines were hit with a 19% tariff, following a 20% levy imposed last month on Vietnam, the region’s manufacturing leader.

With a combined GDP exceeding $3.8 trillion, Southeast Asian economies had scrambled to make concessions and secure trade arrangements with the U.S., their top export market, in an effort to retain competitiveness and prevent companies from shifting operations elsewhere.

Malaysia’s trade ministry welcomed the reduced rate, which dropped from a threatened 25%, calling it a positive outcome that protected its critical sectors. Thailand’s finance minister Pichai Chunhavajira noted that a reduction from 36% to 19% would bolster economic resilience, investor confidence, and future growth.

Although specific trade deals remain under negotiation, the U.S. has agreed to general “framework agreements” with Indonesia and Vietnam, with Thailand saying it is partway through its own deal-making process.

Cambodia, whose garment industry employs around a million people, saw its tariff rate cut from up to 49% to 19%- a move hailed by Deputy Prime Minister Sun Chanthol as vital to avoiding economic collapse in that sector.

Business groups in Thailand and Malaysia welcomed the decision, viewing it as a sign that competition among Southeast Asian exporters would remain balanced, especially within the "China plus one" strategy that has driven growth in the region. “We’re happy,” said Werachai Lertluckpreecha of Star Microelectronics, adding that the rates put them in line with peers.

Some, like Malaysia’s semiconductor industry chief Wong Siew Hai, said the situation may return to “business as usual” as companies assess next steps.

Still, unresolved issues such as non-tariff measures, rules of origin, and anti-transshipment rules remain. These could impact Vietnam especially, given its large trade surplus with the U.S. and concerns over the rerouting of Chinese goods through the country. Although Vietnam negotiated a drop from a threatened 46% to 20%, companies worry that its dependence on Chinese components could still trigger a punitive 40% tariff.

Andrew Sheng of the Asia Global Institute described the development as a typical Trump move: “lots of hype and threats” followed by an outcome that leaves the other side feeling they got a fair deal.

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