Tariff Turmoil: South East Asia Reels Under Trump's New Trade Deals

As the U.S. implements steep tariffs, South East Asian economies struggle to negotiate trade deals. Thailand and its neighbors face uncertain futures as they gesture toward alleviating economic impacts.

US President Donald Trump's tariff regime has sent shockwaves across South East Asia, sending countries into a scramble for trade deals to protect their export-driven economies. The dramatic tariff announcement made by Trump on April 2 has particularly impacted nations like Thailand, Vietnam, Malaysia, and Cambodia. The levies have soared as high as 49%, targeting various sectors from electronics to textiles.

Richard Han, CEO of Hana Microelectronics in Thailand, immediately felt the effects of the proposed 36% levy. “I woke up early to see him on the White House lawn announcing the tariffs and thought: ‘How could this be real?’” he recounted. Fortunately for Thailand, negotiations succeeded in reducing the initial rates to 19%, a development only finalized days before the August 1 deadline Trump set.

Despite securing a deal, doubt looms over the substance of these agreements. Vietnam, the country most at risk from tariffs totaling $137bn—30% of its GDP—was the quickest to negotiate. Its leadership announced a reduction to 20% but has yet to substantiate Trump's claims regarding tariffs on American imports. This uncertainty in agreements leaves many countries stranded without clear paths forward.

Thailand, unlike Vietnam's swift responses, faces complicated domestic politics and public sentiment that hinder decisive action. As the acting Prime Minister, Phumtham Wechayachai navigates a coalition government influenced by various factions, the challenges increase further with past grievances, including Thailand's controversial return of Uyghur refugees to China, lingering in the backdrop of trade talks.

Additionally, US requests to access Thailand’s competitive agricultural sector pose dilemmas in negotiations. Goods like pork and poultry are vital to local farming, leading to fears over competition with American products, particularly from larger-scale US producers. Agribusiness figures, fearing the implications of tariff reductions, have advocated against loosening market protections.

Manufacturers like SK Polymer, heavily invested in supplying US markets with rubber and synthetic components, argue that the 36% levy would have disastrous consequences. “Margins are thin as it is; we can’t sustain that,” asserted managing director Suparp Suwanpimolkul. They express relief over the new 20% arrangement but still await further clarity.

Further complicating the situation, firms in Thailand are part of a convoluted global supply chain. Electronics manufacturers voice concerns about compliance with new local content requirements. They recount the complexity of adjusting to US demands while relying heavily on foreign components, including those sourced from China.

As reported, the issues surrounding “trans-shipment” could paint a grimmer picture for Thailand and its neighbors if US policies remain unyielding. The Trump administration shows little regard for World Trade Organization standards, leading many businesses to wonder what the true conditions will entail for their operational viability.

As negotiations drag on, both manufacturers and officials in Thailand grapple with the anxiety of adapting to new and often unpredictable trade regulations. “We are waiting to learn how to navigate this shifting landscape," shared Han. The deals so far might alleviate immediate pressure, but the unknown future looms large over South East Asia's economic ambitions.