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

Al Arabiya

6 days ago

Southeast Asian countries breathed a sigh of relief on Friday after the US announced tariffs on their exports that were far lower than threatened and leveled the playing field with a rate of about 19 percent across the region's biggest economies.
US President Donald Trump's global tariffs offensive has shaken Southeast Asia, a region heavily reliant on exports and manufacturing and in many areas boosted by supply chain shifts from China.
Thailand, Malaysia, and Cambodia joined Indonesia and the Philippines with a 19 percent US tariff, a month after Washington imposed a 20 percent levy on regional manufacturing powerhouse Vietnam.
Southeast Asia — with economies collectively worth more than $3.8 trillion — had raced to offer concessions and secure deals with the United States, the top export market for much of the region.
Its countries, many of them key players in the global supply chain, vied to stave off the prospect of losing market share to each other and of multinational firms shifting operations and orders elsewhere.
Malaysia's trade ministry said its rate, down from a threatened 25 percent, was a positive outcome without compromising on what it called 'red line' items.
Thailand's finance minister said the reduction from 36 percent to 19 percent would help his country's struggling economy face global challenges ahead.
'It helps maintain Thailand's competitiveness on the global stage, boosts investor confidence and opens the door to economic growth, increased income and new opportunities,' Pichai Chunhavajira said.
The extent of progress on bilateral trade deals with the United States was not immediately clear, with Washington so far reaching broad 'framework agreements' with Indonesia and Vietnam, with scope to negotiate further. Pichai said Thailand was about a third of the way there.
The United States on Friday slashed the tariff rate for Cambodia to 19 percent from earlier levies of 36 and 49 percent — a major boost for its crucial garments sector, its biggest economic driver and source of about a million manufacturing jobs.
'If the US maintained 49 percent or 36 percent, that industry would collapse in my opinion,' Cambodia's Deputy Prime Minister and top trade negotiator Sun Chanthol told Reuters in an interview.
In Thailand and Malaysia, business groups cheered a tariff rate that could signal a maintenance of the status quo between rival markets, among them beneficiaries of so-called 'China plus one' trade.
'It's very good — we're on par with Indonesia and the Philippines and lower than Vietnam … we're happy,' said Werachai Lertluckpreecha of semiconductor manufacturer Star Microelectronics.
Chookiat Ophaswongse of the Thai rice exporters association said the similar rate to Vietnam would maintain its share of the US market, while Wong Siew Hai, president of Malaysia's semiconductor industry association, said the latest tariffs would level the competition.
'I don't see the companies doing anything special. It will be business as usual for now, until they figure out what is the next best move,' Wong said.
Much remains to be worked out by the Trump administration, including non-tariff barriers, rules of origin, and what constitutes transshipment for the purposes of evading duties — a measure targeting goods originating from China with no or limited value added, where a 40 percent tariff would apply.
Vietnam has one of the world's largest trade surpluses with the United States — worth more than $120 billion last year — and has been often singled out as a hub for the illegal re-routing of Chinese goods to America.
It was a first-mover in trade talks and reached an agreement in July that slashed a levy from a threatened 46 percent to 20 percent, but concerns remain among some businesses that its heavy reliance on raw materials and components imported from China could lead to a wider application of the 40 percent rate.
'That is the real issue,' said one businessman in Vietnam, who asked not to be named to allow him to speak more freely.
Andrew Sheng of the University of Hong Kong's Asia Global Institute said the similar tariffs mean Southeast Asian countries should be relieved that policy uncertainty was over for now.
'The tariff announcement looks like a classic Trump Art of the Deal deal — lots of hype and threats, and with one flourish, the other side feels that it has a reasonable deal,' he said.