Laos industry at risk as US imposes 40% tariffs

Fashion Network

21 hours ago

Laos, already struggling with high inflation and severe labour shortages, faces the risk of job losses and declining market share due to a 40% US tariff set to take effect this Friday, in the absence of a bilateral agreement, experts warn.
This landlocked Southeast Asian nation of 7.6 million people is among those affected by former President Donald Trump 's trade measures. Countries like the UK, Japan and Vietnam have rushed to finalise trade deals ahead of the deadline.
Although Laos exports relatively little, a small number of factories—mostly located in the capital, Vientiane—supply the American market, accounting for roughly 3% to 6% of the country's GDP.
However, Laos' supply chains are closely tied to China, the United States' main economic rival. According to data from last year, the US has a trade deficit of over $760 million with Laos, prompting Washington to threaten one of the highest tariff surcharges announced by the Trump administration.
'We estimate that around 20,000 workers or more will be affected,' said Xaybandith Rasphone, president of the Lao Garment Industry Association.
'We're not sure of the exact number yet, but it could easily be higher if companies close down,' added Rasphone, who also serves as vice president of the National Chamber of Commerce and Industry.
Rasphone said that if US customers pull back, 35 to 40 factories may face disruption. 'Finding alternative markets takes time, negotiation and a lot of effort. It could take years.'
Like neighbouring Cambodia and Vietnam, Laos is a regional base for garment manufacturing, supplying many Western brands, including Dr. Martens.
'A 40% surtax is simply a nail in the coffin for any sector trying to export to the US,' said John F. Somers of Diep Vu Co, a garment manufacturer.
In Vientiane, a local saleswoman who declined to be named said she was 'living from day to day.' She added, 'For the moment, I still have my business and the factory is running as usual,' though she expressed uncertainty about what the US will ultimately decide.
From photovoltaics to textiles
Production of mattresses, silicone products, and solar panels could also be affected by the tariffs.
The solar sector has expanded rapidly in Laos since 2023, fueled in part by Washington's earlier 50% tariff on Chinese solar products. But according to Casey Tolzman, president of the Association of American-Laotian Businesses, this solar 'boom' may have raised suspicions in Washington.
US trade authorities have increasingly targeted transhipment schemes—where countries repackage goods made in China for export to the US, bypassing tariffs.
A temporary truce, due to expire on August 12, currently sets US tariffs on Chinese products at 30%, while China's tariffs on American goods remain at 10%.
The Laotian textile sector is also closely watching the developments. Although the European Union—especially Germany—has been the main destination for Laotian textiles, the US has long been among the top five export markets.
In this country of 7.6 million people, the garment industry employs nearly 30,000 workers and represents around 13% of export earnings, excluding natural resources.
"Real question"
'One of the big questions for countries like Cambodia and Laos is: what can they offer that's attractive enough to the US to secure a deal?' said Tolzman.
'Any deal would probably require Laos to enforce stricter rules on transhipment and product origin, to ensure that Chinese-made goods aren't simply relabeled as Laotian.'
Tolzman added that Washington may also demand action against cybercrime operations targeting American citizens, or ask for greater market access for US products in Laos.
Both the National Chamber of Commerce and Industry and the Lao American Business Association are reportedly helping Vientiane draft a formal appeal to the US government, requesting the surtax be reduced to previous levels—or capped at 20%.
But Somers warned of a deeper threat, regardless of whether a deal is reached.
Laos is expected to graduate from the UN list of least developed countries in 2026, which would result in the loss of its duty-free access to the European Union.
'We'll be at a competitive disadvantage; our industry will probably collapse within a few years,' said Somers. 'The real issue is the EU's relationship with Laos, not just what the US does.'
(with AFP)