Will Trump's trade war widen Southeast Asia's wealth gap? – DW – 08/11/2025

DW

a day ago

Southeast Asian governments are hailing lower-than-expected US tariffs as a diplomatic win. But the region's poorest are still set to bear the brunt of the trade conflict, and the celebrations could be short lived.
Many in Southeast Asia breathed a sigh of relief after the Donald Trump administration partially walked back its tariff threats.
While Washington still imposed a series of trade penalties, Southeast Asian states managed to secure far lower levies than many other parts of the world.
Cambodia, for example, secured a 19% rate, down from 49% which was previously threatened by the US president. According to Cambodia's chief trade negotiator, Sun Chanthol, the 49% tariffs would have "collapsed" the country's vital garment industry.
The sector employs around 800,000 workers, most of them women born in rural areas.
Vietnam, which has one of the largest trade surpluses with the US, saw its tariffs reduced to 20% from the 46% import penalty threatened by President Trump in April.
Thailand, Malaysia, Indonesia and the Philippines also negotiated 19% levies. Singapore was given the baseline 10%. Myanmar and Laos, however, were not so lucky — they face levies of 40%, and are among the hardest hit nations globally.
Still, most government in Southeast Asia see the outcome of the last-minute trade negotiations as a diplomatic victory.
In states with large garment sectors, there is even some schadenfreude that key competitor India was last week hit with 50% tariffs on some goods, a blow that has reportedly already pushed some manufacturers to consider relocating to Southeast Asia.
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Analysts warn, however, that the full impact of the revised rates on ordinary households will only become clear in the months ahead.
As part of the tariff negotiations, most Southeast Asian countries agreed to cut their taxes on US imports to nearly zero, a move that will "definitely help the wealthy with some luxury imports," Zachary Abuza, professor at the National War College in Washington, told DW.
For the most part, though, the benefits for the rich are unlikely to outweigh the broader risks for the poor.
"Trump's policy will certainly have negative impacts on people in Southeast Asia, including the poor," Budy Resosudarmo, a developmental and environmental economist at the Australian National University, told DW.
Southeast Asia has seen decades of strong economic growth, but concerns have long simmered over how fairly this wealth is distributed.
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The latest US tariffs could affect the wealth gap in several ways — for example, they might trigger a downturn in labor intensive sectors, such as garment manufacturing.
This, in turn, could push more capital into technology industries, which employ fewer workers, according to Wannaphong Durongkaveroj, associate professor of economics at Thailand's Ramkhamhaeng University.
If this shift happens quickly and smoothly, the damage will be limited, he told DW. If not, the lower-skilled parts of the economy that employ a majority of workers will be doubly impacted.
At the same time, there is no guarantee that the technology sector will avoid the tariffs.
Last week, Trump announced 100% penalties on imported semiconductor chips — except for companies that had already committed to manufacturing in the US or were in the process of doing so.
This is a particular concern for Malaysia, which exported around $14 billion (over €12 billion) worth of semiconductors to the US last year. Its semiconductor industry employs about 80,000 people.
While Kuala Lumpur said its chips are exempt from the 19% reciprocal tariff, it remains unclear if US exemptions will be applied consistently.
There might also be higher unemployment or suppressed wage growth if there's a spike in imports to Southeast Asian states from countries seeking non-US markets, Hwok-Aun Lee, senior fellow with the Regional Economic Studies Programme at Singapore's ISEAS-Yusof Ishak Institute, told DW.
Even before Trump returned to the White House in January, there were concerns in Southeast Asia that China was dumping surplus goods on the region, reducing demand for local goods.
China's global exports rose 7.2% in July from the same month last year, but shipments to Southeast Asia jumped 16.6%, while exports to the US fell by more than a fifth, according to official Chinese data.
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The immediate effect of this influx will be on wages, Lee warned, adding that "this could have longer-term implications, such as slower wealth accumulation among workers and increased wealth inequality in society."
An even bigger worry is the US plan to impose 40% tariffs on exports it deems "transshipment."
This refers to goods that are shipped from the origin country to an intermediate location, only to be relabeled or tweaked and exported again to the final destination.
Specifically, the US will be looking at goods originating from China that are exported via Southeast Asian countries to the US.
The reported last week that the White House will release rules on what qualifies as transshipment "in a few weeks."
Many lower-end manufacturing jobs in Southeast Asia involve importing raw materials from China, making only slight modifications or assembly, and then exporting the finished product to the US.
If Washington adopts a broad definition, analysts warn, entire industries could be wiped out.