Southeast Asia Navigates U.S. Tariffs: An Octa Broker Analysis
KUALA LUMPUR, MALAYSIA – Media OutReach Newswire – 23 May 2025 – Asian countries are navigating uncertainty amidst the U.S. tariff pause. The region runs a large trade surplus with the U.S., and many countries' economies rely heavily on exports. Now, the Asian states have about seven weeks left to negotiate new trade deals with the U.S. Octa Broker looks at the progress made so far and weighs the chances for a final agreement.
Ever since Donald Trump became the 47th President of the United States (U.S.), the markets have grown increasingly concerned about the health of the world economy. Specifically, the outlook for the international trade order became uncertain as Trump's 2024 election platform included expansive claims about new tariffs. Indeed, on 2 April, 2025, Trump unveiled his long-promised 'reciprocal' tariffs strategy, essentially imposing hefty import duties on more than a hundred of countries. However, less than a week after revealing his reciprocal tariffs, Trump adjusted his policy, declaring that countries that had not retaliated would receive a reprieve until July and would only face a blanket US tariff of 10%. At the same time, the tariffs on China were increased even further.
The principal idea behind Trump's aggressive trade policy is that higher import costs would encourage global manufacturers to re-locate production into the U.S., while also pressuring other nations to buy more U.S. goods, thereby correcting the U.S.'s massive trade deficit. Thus, counties that run large trade surpluses with the U.S. have most to fear and most to lose from these tariffs. Many of these countries are located in South and Southeast Asia (see the table below). For these countries, Trump's decision to pause the reciprocal tariffs for 90 days has offered a critical window for negotiation.
ADVERTISEMENT
Selected data for international trade in goods for some Asian countries (2024)
Trade balance with the U.S. (million USD) Share of U.S. imports After reciprocal tariffs imposed Total until July Cambodia 9,652 <1% 49% 10% China 359,850 13.4% 34% negotiations still ongoing India 42,931 2.7% 26% 10% Indonesia 12,638 <1% 32% 10% Laos -109 <1% 48% 10% Malaysia 15,744 1.6% 24% 10% Myanmar 361 <1% 44% 10% Philippines 3,276 <1% 17% 10% Singapore -11,850 1.3% 10% 10% Thailand 35,045 1.9% 36% 10% Vietnam 103,392 4.2% 46% 10%
Source: International Monetary Fund, White House
The negotiations between the U.S. with China commenced and have already yielded some positive results. There is hope among other Asian states that similar productive discussions and agreements to mitigate the impact of the proposed tariffs can follow. The coming weeks are crucial as countries navigate the negotiation period before the 90-day pause expires, seeking to secure more favorable trade conditions with the U.S.
China
China is a central focus of the U.S. trade policy. In 2024, the total value of goods traded between two countries was approximately $582.4 billion. The U.S. relies heavily on Chinese imports of electronic equipment and machinery, while China primarily imports U.S. mineral fuels, oil seeds, electrical machinery and mechanical appliances. However, the trade balance significantly favors China, which recorded a $360 billion surplus with the U.S. in 2024, according to IMF data.
Last Monday, Donald Trump announced a broad trade deal with Beijing that lowered import taxes on all Chinese goods from 145% to 30%. China, in turn, lowered its tariffs on U.S. imports from 125% to 10%. The reductions will hold for the next 90 days, while the two countries negotiate a longer-term deal. A few days later, the U.S. cut the so-called 'de minimis' tariff for low-value shipments from China to as low as 30%. Meanwhile, the Chinese Commerce Ministry said it had paused some non-tariff measures taken against 17 U.S. entities put on its unreliable entity list in April and 28 U.S. entities on its export control list.
'A full-blown trade war between the world's two largest economies would have been disastrous for the global market. Thankfully, the officials agreed to de-escalate it quickly. However, we are still not out of the woods yet', says Kar Yong Ang, a financial market analyst at Octa Broker, adding that a long-term trade agreement between China and the U.S. is yet to be finalized and that markets are being a bit too optimistic right now. 'Let's not forget that Trump tried to renegotiate a trade deal with China during his 1st term, but the talks failed in 2019 despite the fact that there was agreement in principle. And I personally believe that the markets are a bit too optimistic about the prospects for a grand deal this time'.
Indeed, U.S. equity indices have recovered swiftly following the decision to de-escalate, but the rally may not last. 'It would not take much for the bearish sentiment to reemerge. Although tariffs have been lowered, the existing tariffs are still doing damage to the global economy. U.S. inflation is likely to pick up in the months ahead and that would prevent the Federal Reserve (Fed) from delivering on anticipated rate cuts, which may trigger a major selloff in equities', comments Kar Yong Ang. Either way, other Asian countries are monitoring the progress carefully and are also engaged in active discussions with the U.S. officials.
Vietnam
Vietnam faces duties of 46% on its exports to the U.S. if a reduction cannot be negotiated before a global moratorium expires in July. As a major export-reliant industrial hub, to where numerous companies have relocated (not least in order to lower their exposure to China), Vietnam runs the second-largest trade surplus with the U.S. among Asian countries. It is, therefore, unsurprising, that the two countries began informal talks to avoid tariffs well before Trump announced global reciprocal duties on 2 April. Among the issues discussed are the reduction of Vietnam's big trade surplus, the fight against trade fraud such as illegal transshipments, the lowering of tariff and non-tariff barriers for U.S. businesses and enhanced protection of intellectual property, including the fight against counterfeits and digital piracy.
'Vietnam stands to lose a lot should trade talks fail. Companies like Apple, Nike, and Samsung Electronics have large manufacturing operations in the country and may consider leaving altogether if a 46% duty is introduced. I think Vietnamese authorities will do their best to achieve a trade deal with the U.S.', commented Kar Yong Ang.
Indeed, just a few days ago, Vietnam News Agency reported that Vietnamese Prime Minister Pham Minh Chinh ordered a one-month intensive campaign to crack down on smuggling, trade fraud and counterfeit goods. Previously, the news surfaced that the Trump Organization was partnering with Vietnam on potential investments in hotel, real estate and golf course projects possibly worth billions of dollars.
According to the WorldBank, the U.S. is Vietnam's largest export market with a share of at least 30% and more than $110 billion worth of shipments.
Thailand
Thailand faces duties of 36% on its exports to the U.S. According to the Bangkok Post, Thai government had said that it would increase imports of U.S. goods, such as corn, soybean meal, crude, ethane, liquified natural gas, autos and electronics to reduce its bilateral trade surplus. In addition, the government submitted a separate trade proposal to the U.S., which included 5 to 6 key points. Last Monday, the head of Thailand Trade Representatives met with U.S. senators, congressional leaders, and major American companies, in a bid to reaffirm Thailand's role as a key investor in the country and explore joint Thai-U.S. manufacturing.
'Thailand has clearly taken the trade matters quite seriously despite its relatively small trade surplus. There are good chances that a final agreement could be reached before global pause expires in July', commented Kar Yong Ang.
According to the WorldBank, the U.S. is Thailand's largest export market with a share of at least 16% and more than $50 billion worth of shipments.
Malaysia
Malaysia faces duties of 24% on its exports to the U.S. However, Tengku Zafrul Aziz, Malaysia's Minister of Investment, Trade, and Industry, recently said that he was 'optimistic' for a trade agreement with the U.S. within a 90-day period. He visited the U.S. at the end of April and was fully committed to resolving the differences. 'All communication lines remain open and we will continue to work towards an amicable solution to this reciprocal tariff matter', Tengku Zafrul Aziz said.
'It seems like the Forex market shares the trade minister's optimism. The Malaysian ringgit has been strengthening lately. USDMYR may potentially drop below 4.240 if a trade deal is struck', commented Kar Yong Ang.
According to the WorldBank, United States is Malaysia's third largest export market with a share of at least 11% and more than $40 billion worth of shipments.
Indonesia
Indonesia plans to 'narrow' or even eliminate its trade surplus with the U.S. by importing more agricultural products such as wheat, soybeans and corn from the U.S. Overall, Indonesia's reaction to Trump tariffs has been rather muted probably because exports to the U.S. account for just around 2% of Indonesia's Gross Domestic Product (GDP). Moreover, Indonesia's exports are relatively well diversified and although the U. S. is an important export destination, its share is relatively minor.
According to the WorldBank, the U.S. is Indonesia's second largest export market with a share of at least 10% and more than $30 billion worth of shipments.
On balance, Asian nations find themselves in a crucial period, actively negotiating with the U.S. to mitigate the impact of potential tariffs. While the progress achieved during the U.S.-China talks offers some hope, the diverse situations and negotiating stances of countries like Vietnam, India, Thailand, Malaysia, and Indonesia highlight the complexity of reaching widespread agreements. As Octa Broker analysts suggest, the optimism surrounding these trade discussions should be tempered with the understanding that lasting resolutions remain uncertain, and market reactions may be premature.
___
Disclaimer: This content is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to engage in any investment activity. It does not take into account your investment objectives, financial situation, or individual needs. Any action you take based on this content is at your sole discretion and risk. Octa and its affiliates accept no liability for any losses or consequences resulting from reliance on this material.
Trading involves risks and may not be suitable for all investors. Use your expertise wisely and evaluate all associated risks before making an investment decision. Past performance is not a reliable indicator of future results.
Availability of products and services may vary by jurisdiction. Please ensure compliance with your local laws before accessing them.
Hashtag: #Octa
The issuer is solely responsible for the content of this announcement.
Octa
Octa is an international CFD broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services used by clients from 180 countries who have opened more than 52 million trading accounts. To help its clients reach their investment goals, Octa offers free educational webinars, articles, and analytical tools.
The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure and funding short-notice relief projects to support local communities.
In Southeast Asia, Octa received the 'Best Trading Platform Malaysia 2024' and the 'Most Reliable Broker Asia 2023' awards from Brands and Business Magazine and International Global Forex Awards, respectively.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Gulf Today
4 hours ago
- Gulf Today
Outrage over Trump's electric vehicle policies is misplaced
Ashley Nunes, Tribune News Service Electric car subsidies are heading for the chopping block. A tax bill recently passed by House Republicans is set to stop billions in taxpayer cash from being spent on electric vehicle purchases. If embraced by the Senate and signed into law by President Donald Trump, the bill would gut long-standing government handouts for going electric. The move comes on the heels of another climate policy embraced by Republicans. Earlier this year, Trump announced plans to roll back burdensome rules that effectively force American consumers to buy electric, rather than gas-fueled, cars. The Environmental Protection Agency has called that move the 'biggest deregulatory action in US history.' Not everyone sees it that way. Jason Rylander, legal director at the Center for Biological Diversity's Climate Law Institute, assailed Trump's efforts, noting that his 'administration's ignorance is trumped only by its malice toward the planet.' Other similarly aligned groups have voiced similar sentiments arguing that ending these rules would 'cost consumers more, because clean energy and cleaner cars are cheaper than sticking with the fossil fuels status quo.' Backtracking on EV purchasing mandates seems to have hit Trump haters particularly hard. That mandate — established by President Joe Biden — would have pushed US automakers to sell more EVs. Millions more. Electric cars currently account for 8% of new auto sales. Biden ordered— by presidential fiat — that figure to climb to 35% by 2032. If you believe the hype, the result would be an electric nirvana, one defined by cleaner air and rampant job creation. I'm not convinced. For one thing, cleaner air courtesy of electrification requires that EVs replace gas-powered autos. They're not. In fact, study after study suggests that the purchase of EVs adds to the number of cars in a household. And two-thirds of households with an EV have another non-EV that is driven more — hardly a recipe for climate success given that EVs must be driven (a lot) to deliver climate benefits. Fewer miles driven in an EV also challenges the economic efficiency of the billions Washington spends annually to subsidise their purchase. Claims of job creation thanks to EVs are even more questionable. These claims are predicated around notions of aggressive consumer demand that drives increased EV manufacturing. This in turn creates jobs. A recent Princeton University study noted, 'Announced manufacturing capacity additions and expansions would nearly double US capacity to produce electric vehicles by 2030 and are well sized to meet expected demand for made-in-USA vehicles.' Jobs would be created if there were demand for EVs. Except that's not what's happening. Rather, consumer interest in EVs has effectively cratered. In 2024, 1.3 million EVs were sold in the United States, up from 1.2 million in 2023. This paltry increase is even more worrying given drastic price cuts seen in the EV market in 2024. Tesla knocked thousands of dollars off its best-selling Model 3 and Model Y. Ford followed suit by cutting prices on its Mach-e. So did Volkswagen and Hyundai. Despite deep discounts, consumer interest in electrification remains — to put it mildly — tepid at best. So, when people equate electrification with robust job creation, I'm left wondering what they are going on about. Even if jobs were created, EV advocates are coy about how many of those jobs would benefit existing autoworkers. Would all these workers — currently spread across large swaths of the Midwest — be guaranteed jobs on an EV assembly line? If not, how many workers should expect to receive pink slips? For those who do, will they be able to find new jobs that pay as much as their old ones? Touting job creation for political expediency is one thing. Fully recognising its impact on hardworking American families today, another. Some Americans may decry Trump's actions on climate, but they have only themselves to blame. Many of the pro-climate policies enacted, particularly during the Biden era, deliver little in the way of climate benefits (or any benefit for that matter) while making a mockery of the real economic concerns businesses and consumers have about climate action. No more. In justifying climate rollbacks, the president says many of his predecessor's policies have hurt rather than helped the American people. He's right and should be commended for doing something about it.
Gulf Today
4 hours ago
- Gulf Today
Russian CB cuts key rate to 20%, inflation slowing down
The Russian central bank cut its key interest rate by one percentage point to 20 per cent on Friday, saying economic growth is cooling down and inflation is slowing. 'Current inflationary pressures, including underlying ones, continue to decline. While domestic demand growth is still outstripping the capabilities to expand the supply of goods and services, the Russian economy is gradually returning to a balanced growth path,' the bank said in a statement. A Reuters poll had predicted that the central bank would keep the key rate on hold. It had been at 21 per cent since last October to curb inflation in the overheated economy, which is focused on the needs of the military fighting in Ukraine. As a result, Russia's economic growth rate fell to 1.5 per cent year-on-year in the first four months of 2025, compared to 4.3 per cent last year, prompting sharp criticism of central bank governor Elvira Nabiullina. Consumer prices have risen by 3.39 per cent since the start of the year, compared to 3.88 per cent in the same period last year, while the annualised inflation rate fell below 10 per cent in May after peaking at 10.34 per cent in March. The central bank forecasts inflation this year at 7 per cent to 8 per cent and economic growth at 1 per cent to 2 per cent. The Economy Ministry is more optimistic, predicting growth of 2.5 per cent. The strengthening of the rouble, which has rallied by about 40 per cent against the dollar since the start of the year, has aided the central bank in its fight against inflation by making imported goods cheaper. Its rise has been largely thanks to US President Donald Trump's efforts to bring Russia and Ukraine to the negotiating table. But most analysts agree that without any sign of a breakthrough in the talks, the rouble is waiting for a trigger to start falling. 'Tight monetary policy has a particularly strong effect on the decrease in prices for non-food goods, including through the rouble appreciation,' the central bank said. Inflationary expectations among households, an important gauge monitored by the central bank, rose for a second month in a row in May to a level last observed around the time of the last rate hike in October. Some analysts have linked the rise in inflationary expectations to a planned mid-year nationwide increase in payments for electricity, gas, water, and communal services for households, suggesting that the regulator might ignore the gauge this time. Food inflation, with prices for staples like potatoes tripling since last year due to a poor harvest, has severely affected Russia's poor. The harvest outlook for this year will heavily influence the central bank's thinking. 'As for food products and services, inflationary pressures remain high,' the bank said. The tight monetary policy, with the key rate at its highest level since the early 2000s and also the highest among major economies in the BRICS group, has made loans and debt financing, and therefore investment, inaccessible for many Russian firms. The central bank counters this by saying that its research shows enterprises in most sectors make enough profits to finance their investments and that the situation even in vulnerable sectors, such as construction, does not pose systemic risks. Meanwhile Russia's economic growth slowed to 1.4 per cent year-on-year in the first quarter of 2025, the lowest quarterly figure in two years, data from the official state statistics agency showed on Friday. Economists have warned for months of a slowdown in the Russian economy, with falling oil prices, high interest rates and a downturn in manufacturing all contributing to headwinds. Moscow reported strong economic growth in 2023 and 2024, largely due to massive state defence spending on the Ukraine conflict. But economists have cautioned that growth driven by the defence industry is unsustainable and does not reflect a real increase in productivity. The Russian economy grew by 1.4 per cent year-on-year in the first three months of the year, the lowest quarterly figure since the first quarter of 2023, Rosstat data showed. The economy expanded 4.5 per cent in the previous quarter, according to the data. Prices have also been rising quickly across the Russian economy for months, driven up by massive government spending on the Ukraine conflict and deep labour shortages. Inflation in April remained above 10 per cent for the third month in a row, figures showed. Last month, the Russian central bank maintained its key interest rate at 21 per cent, with inflation starting to decline but new risks facing the Russian economy because of global economic turbulence triggered by US trade tariffs. 'A further decrease in the growth rate of the global economy and oil prices in case of escalating trade tensions may have proinflationary effects through the rouble exchange rate dynamics,' the central bank said in a statement. Agencies
Gulf Today
4 hours ago
- Gulf Today
How big of a threat is Asian superpower China really?
Daniel DePetris, Tribune News Service Last June, during an annual security conference in East Asia, then-Defense Secretary Lloyd Austin underscored that the United States was not seeking conflict with China. Maintaining a consistent dialogue with Beijing, he hinted, was just as vital to effective deterrence as ensuring the US military was fully equipped and prepared. Fast-forward a year later and the message from Washington is far different. Unlike his predecessor, Defense Secretary Pete Hegseth name-dropped China in his speech to the same security conference multiple times, as if to shame the Asian superpower for running roughshod over the so-called rules-based international order. China, Hegseth warned, was trying to become a hegemon in Asia, where it could dominate its neighbours, exploit the South China Sea's vast natural resources and coerce other countries into accepting Beijing's demands. In Hegseth's words, 'It has to be clear to all that Beijing is credibly preparing to potentially use military force to alter the balance of power in the Indo-Pacific.' An invasion of Taiwan, he added, could be 'imminent.' If this all sounds scary, that's because it is. His comments raise the rhetorical gamesmanship to a level US officials weren't comfortable with in the past. The Biden administration was no slouch on China policy, but it still didn't want to inflame things unnecessarily. The Pentagon, for instance, repeatedly emphasized that while China's military drills around Taiwan were aggressive and designed to wear down the island's will to resist, a conflict in the Taiwan Strait was 'neither imminent nor inevitable.' In other words, there was still an opportunity to defuse any tensions before they exploded into a war that could drag the United States in, kill tens of thousands of people and throw a heavy wrench into the global economy. The Trump administration, however, has deployed noticeably sharper words during its first four months. Although the fundamentals of its wider policy in East Asia mimic the Biden administration's own — reinforcing US alliances; engaging in regular freedom of navigation exercises with Japan and the Philippines; and stressing the utility of preserving the status quo in the Taiwan Strait — Trump's advisers aren't afraid of poking Beijing in the eye. If managing the systemic rivalry with Beijing was a core component of Washington's overall strategy throughout Biden's four years, it increasingly looks like the guardrails that were put in place to prevent miscalculations are now eroding. Even so, does the Trump administration have a point? Is a conflict over Taiwan imminent as Hegseth suggests? And how real is the risk of China becoming Asia's hegemon? First, we should acknowledge that China is a threat in certain respects, particularly to its neighbors who have competing jurisdictional claims. The People's Liberation Army, or PLA, is arguably the strongest military in the region today, a consequence of Chinese President Xi Jinping's long-standing policy of pouring money into its coffers to fund a large-scale modernization campaign. China spent $314 billion on defense in 2024, a 7% increase from the year prior and a whopping 59% increase from a decade ago. The PLA boasts the largest ballistic missile arsenal in Asia and continues to invest in hypersonic missiles, which are difficult for conventional air defenses to intercept. The PLA is also throwing out the old rulebook that used to govern affairs in East Asia. As I mentioned last week, the median line that once served as an unofficial boundary separating Chinese and Taiwanese airspace is now imaginary as the Chinese air force flies closer to the self-ruled island to test Taiwan's defenses and wear down morale. Yet the United States would be wise to refrain from overestimating China's military capability and underestimating the capability of its allies like Japan, the Philippines, South Korea and Australia — all of whom have an even greater interest in preventing Chinese hegemony in Asia than Washington does. China is its own worst enemy in this regard: The more it presses its territorial claims, the more incentive its neighbors have to balance Beijing. For the most part, this is exactly what China's neighbours are doing. Japan is the most obvious case study. Traditionally a pacifist country that kept to an artificially low defense budget relative to its wealth, Japan has spent the last three years adding resources to its so-called Self-Defense Forces and buying American weapons off the shelf. Tokyo's latest national security strategy, unveiled in 2022, was a sea-change in how Japan typically talks about its security environment. In that document, China was called out for challenging the international order, partnering with Russia in its war against Ukraine and trying to change the region's status quo by force. Japan's defense budget is set to double by 2027, and with more resources comes a greater capability to preserve the balance of power. The Philippines is another example. While the country can't possibly compete with China in conventional terms, the Philippine government under President Ferdinand Marcos Jr. has effectively given up on rapprochement with Beijing and thrown in its lot with Washington. China's incessant clashes with Philippine forces in the South China Sea have served as a wake-up call to a country whose previous administration under Rodrigo Duterte (who is now in custody at the Hague for war crimes) drifted into the Chinese camp and took a more suspicious view of US intentions. Today, Manila is not only buttressing its navy and coast guard but also increasingly partnering with countries like Japan and Australia who have a similar threat perception about China.
