The economic landscape in Southeast Asia is experiencing unprecedented shockwaves following US President Donald Trump's abrupt tariff announcements on April 2nd, which marked a significant challenge for export-reliant nations. The hefty tariffs, soaring as high as 49%, targeted various industries, from electronics in Thailand and Vietnam to clothing in Cambodia. Richard Han, CEO of Hana Microelectronics, recalled the moment he first saw the tariffs: "It was quite early, and seeing him standing there on the White House lawn... I thought: 'Did I see that right? 36%? How could it be?'"
Thailand, facing a 36% tariff, has managed a deal reducing it to 19%, finalized just before Trump's 1 August deadline. However, many details remain shrouded in ambiguity. The Association of Southeast Asian Nations (ASEAN) collectively exported $477bn worth of goods to the US in 2024, with Vietnam being the most vulnerable at $137bn, about 30% of its GDP.
Negotiating with the US was particularly pressing for Vietnam, which quickly struck a deal cutting its tariffs from 46% to 20%. Yet, the absence of concrete details has raised skepticism, especially regarding the zero tariffs on US imports. Following Vietnam’s lead, Indonesia and the Philippines secured their own reductions, further complicating Thailand’s position which relies heavily on agricultural exports, a sector under substantial domestic pressure from US demands.
Thailand's negotiations strained due to unrelated actions angering the US, such as repatriating Uyghur asylum seekers to China. Compounding the issue, the Thai government is hindered by a weak coalition and diverse political interests, limiting decisive action unlike Vietnam's single-party resolution. This delicate balance has led to fractious debates within Thailand about the agricultural market, amid fears that full liberalization could devastate local farmers.
Amidst these challenges, manufacturers like SK Polymer, whose products are integral to a global supply chain, express grave concerns over maintaining competitiveness with US tariffs. Suparp Suwanpimolkul of SK Polymer noted that while they could adapt to a 20% tariff, uncertainty remains their greatest enemy. Similarly, electronics firms like SVI face pressures related to production costs as a result of Trump’s tariffs, casting doubt on their ability to comply with the US's stringent demands.
As negotiations continue, fear and uncertainty grip Southeast Asia. Companies fear being caught in a complex tangle of compliance dictated by US standards, especially concerning the supply chain and components. Without clear guidelines from the Trump administration, many Southeast Asian industries find themselves in a precarious position, awaiting further developments, unsure of how to navigate this volatile trade landscape.
"We're all milling around, just waiting to find out how to play the new game," Han summarized, highlighting the ongoing struggle for clarity and stability in trade relations.
