Trump trade tariffs put Asian economies in a bind

President Donald Trump unveiled a barrage of sweeping reciprocal tariffs on US trading partners on Wednesday, billing it as the dawn of a new "golden age" that would see industry and manufacturing jobs return to the country in droves.  

The move is seen as marking a stunning departure from the decades-old consensus on the benefits of unimpeded commerce and globalization.

It could prompt other countries to announce retaliatory measures and erect trade barriers, potentially unleashing a new era of trade protectionism.

Asia's export powerhouses, including China, Japan, South Korea and Vietnam, have been among those being slapped with the steepest duties.

Will it escalate into a full-scale trade war?

Trump is hitting imports from China with a 34% tariff, on top of the 20% levies, he had already imposed since returning to the White House in January. 

This means the total tariff rate on China will jump to 54% within a week, when the new rates take effect on April 9. It threatens bilateral trade estimated to be $582.4 billion (€524 billion) last year, where the US exported products worth $143.5 billion to China while importing goods amounting to $438.9 billion. 

Beijing blasted the decision and vowed retaliation. 

A tit-for-tat tariff escalation could push the world's top two economies deeper into a trade war and upend global supply chains.

It could also complicate Beijing's plan to spur economic growth, targeted at roughly 5% in 2025.

"We think the tariffs could trigger protectionism and severely strike a blow to the world economy," said Fang Dongkui, secretary general of the China Chamber of Commerce to the EU, calling for negotiations between the US and its trading partners to resolve the disagreements, instead of confrontation. 

Fang also stressed the need for China and the EU to strengthen cooperation to maintain the multilateral trade order.

"China and the EU are both export-oriented economies. We should really strengthen our cooperation now. The unstable world needs more stability urgently," Fang told DW. 

Japan 'disappointed' but cautious about retaliation

Trump is imposing a 24% tariff on China's neighbor Japan, the world's fourth largest economy, despite Japanese diplomatic efforts to secure an exemption from the new duties.

Trump has also claimed Japan imposes a 700% tariff on US rice imports. Japanese Agriculture Minister Taku Eto said the figure was "illogical."

Prime Minister Shigeru Ishiba said Tokyo was "extremely disappointed" by the US tariff announcement and pledged to help domestic industry deal with the fallout.

A previously announced 25% tariff on all car imports took effect as scheduled on Thursday in the US, causing deep concern for the Japanese auto industry,  which accounts for nearly 3% of GDP and is directly and indirectly linked to 8% of all jobs in Japan. 

Tokyo, however, appears cautious about retaliation. "We need to decide what is best for Japan, and most effective, in a careful but bold and speedy manner," Trade Minister Yoji Muto was quoted by the Reuters news agency as saying.

What about 'tariff king' India?

While unveiling the tariffs at the White House on Wednesday, Trump said that Indian Prime Minister Narendra Modi was a "great friend" but that he had not been "treating us right."

Trump had previously criticized India's trade policies, calling the country a "tariff king," a "big abuser" of trade ties and "a very high tariff nation."

The US will hit imports from the South Asian nation with tariffs of about 27% from April 9.

The duties deal a blow to New Delhi, which is currently in talks with the Trump administration to strike a bilateral trade accord.

The US is India's largest trading partner, with the annual bilateral goods trade amounting to $129.2 billion in 2024, according to the US Trade Representative Office.

While India sold over $87 billion of products to the US, exports the other way around accounted for $41.8 billion, giving New Delhi a $45.7 billion surplus.

Following Trump's announcement, India signaled a conciliatory tone, saying it was examining the impact of the tariff on its imports and vowing to continue talks for concluding a trade agreement this year.

Lekha Chakraborty, a professor at National Institute of Public Finance and Policy in New Delhi, said there will be short-term volatility, but bilateral negotiations could limit long-term damage. 

"Textiles, engineering goods, electronics, gems, and jewelry exports face immediate competitiveness challenges due to higher US tariffs," she told DW.

She also pointed to the numerous concessions the Modi government made in recent weeks, including tariff cuts on products such as high-end motorcycles and whiskey, and pledges to buy more US energy and weapons.

"India's recent concessions, like cutting tariffs on 8,500 items and boosting US energy and defense imports, aim to narrow the $46 billion trade deficit and secure a bilateral trade agreement," Chakraborty said.

Tariffs upend Southeast Asia's 'China+1' strategy?

Southeast Asia has also been targeted by Trump, with six of the region's economies facing tariffs in the range of as much as 32% to 49%.

Countries like Vietnam and Thailand have emerged as major exporters to the US in recent years, as many global firms moved production to these places as part of their "China+1" strategies to diversify their supply chains.

Vietnam, for instance, is now a major manufacturing location for global behemoths like Apple, Samsung and Nike. It exported goods worth $142 billion to the US last year, accounting for about 30% of its total economic output.

Washington's trade deficit with Vietnam, meanwhile, is the third highest of any country, after China and Mexico.

Trump now announced a 46% tariff rate on US imports from the country, putting in jeopardy Vietnam's attractiveness.

Khac Giang Nguyen, a visiting fellow at ISEAS Yusof Ishak Institute, told DW that Trump's punitive tariffs "bear little relation to how bilateral trade actually functions."

While the levies "may be intended as a negotiation tactic, they're so far off the mark that there's hardly any common ground to work from," Khac added.

Vietnam's prime minister announced the establishment of a "rapid response team" to deal with the fallout from the tariff announcement.

Deputy Prime Minister Ho Duc Phoc is also set to visit Washington next week.

However, the general mood is that walking back the tariffs will be difficult, given that Hanoi would need to modify not only its tariffs on US imports — which it has already started doing in recent weeks — but also dozens of other pieces of legislation that shape all aspects of trade with every other country.

"Vietnam's export-led economy stands to take a hit, and the damage won't stop at the border," Khac said. "Such a heavy-handed move risks unraveling years of painstaking efforts to rebuild US-Vietnam trust after decades of war. Once shaken, that trust is not easily restored."

Prioritizing negotiation over retaliation

Indonesia, a fellow Southeast Asian nation, will face a 32% tariff rate, which "could trigger an economic recession," said Bhima Yudhistira, executive director of the Center of Economic and Law Studies (Celios).

He also fears a rise in beggar-thy-neighbor policies as countries seek alternative markets to compensate for the reduction in US demand for their products.

"Once hit by higher tariffs, the [textile and clothing] brands will reduce the number of orders to Indonesian factories. Meanwhile, domestically, we will be flooded with Vietnamese, Cambodian and Chinese products because they are targeting alternative markets," he said.

Singapore, meanwhile, moaned that it was hit by Trump's 10% base tariff on imports despite the US having a $2.8 billion trade surplus with the rich city-state last year.

Cambodia — which was among the hardest-hit nations, with a 49% levy — said Trump's new tariffs are "not reasonable."

Taiwan, which runs a large $73.9 billion trade surplus with the US, also said the 32% tariffs to be levied by Washington on the self-ruled island were unreasonable. The US duties, however, do not apply to semiconductors, a major Taiwan export.

Despite the pain of tariffs, Southeast Asian governments appear inclined to negotiate with their US counterparts than retaliate.

"We have to negotiate and get into details," said Thai Prime Minister Paetongtarn Shinawatra, Reuters reported. "We can't let it get to where we miss our GDP target."

Cui Mu from DW Chinese, Murali Krishnan from New Delhi, Julian Ryall from Tokyo, Yusuf Pamuncak from DW Indonesia and David Hutt contributed to this report.

Edited by: Wesley Rahn