On April 2, in a pre-signalled move, the Trump administration announced a sweeping 10 percent tariff (effective from April 5) on all countries exporting goods to the U.S., and “reciprocal tariffs” on more than 60 countries (effective from April 9) that are accused of applying unfair tariffs on American exports. The tariffs have shocked the rest of the world, provoking retaliations that might trigger a “full-blown global trade war.” Nine of the 10 members of the Association of Southeast Asian Nations (ASEAN) have been slapped with reciprocal tariffs. Cambodia has been hit with a 49 percent tariff, followed by Laos (47 percent), Vietnam (46 percent), Myanmar (44 percent), Thailand (36 percent), Indonesia (32 percent), Malaysia (24 percent), Brunei (24 percent), and the Philippines (17 percent). Singapore, the one ASEAN country that runs a trade surplus with the U.S., was hit with just the 10 percent baseline tariff.
ASEAN countries quickly responded, in a bid to avoid the tariffs and repair their relations with the U.S. Vietnam was perhaps the first nation to reach out to Trump to find an acceptable and agreeable solution. On April 4, the Communist Party of Vietnam (CPV)’s chief To Lam held a phone call with the U.S. president, which was described by the latter as “very productive.” Lam told Trump that Vietnam was willing to reduce tariffs on American goods to zero and requested that the U.S. do the same. Prior to the call, a Vietnamese Foreign Ministry spokesperson expressed regret and believed that the decision was not in line with the reality of mutually beneficial economic and trade cooperation between the two countries. In the meantime, the Vietnamese Minister of Industry and Trade has sent a diplomatic note requesting that the U.S. “postpone the decision to impose tariffs to spend time discussing and finding a reasonable solution for both sides.” A delegation headed by Deputy Prime Minister Ho Duc Phoc, who is designated as the Lam’s special envoy, is visiting the U.S. this week to pursue negotiations with American counterparts.
Singapore’s Deputy Prime Minister cum Minister for Trade and Industry expressed his government’s disappointment with the U.S. move, given that the two countries have had a longstanding economic relationship and signed a free trade agreement (FTA) in 2003. Under the FTA, the minister said that Singapore is able to take countermeasures, but that it will not do so. In the meantime, Prime Minister Lawrence Wong warned that Washington’s move “marks a seismic change in the global order” and “the era of rules-based globalization and free trade is over. We are entering a new phase – one that is more arbitrary, protectionist, and dangerous.”
In Malaysia, the Ministry of Investment, Trade and Industry (MITI) responded with a statement claiming that the country respects the U.S. decision, but is committed to safeguarding Malaysia’s economic interests. MITI said that Malaysia could use the Trade and Investment Framework Agreement, a pre-existing trade pact between the U.S. and other countries including Malaysia, to “seek reciprocal trade gains” with the U.S., but it is considering not applying retaliatory tariffs.
The Philippines downplayed the impact and said that it would accept the new 17 percent tariff because it believes in maintaining the current good state of the U.S.-Philippine alliance.
Thailand’s Prime Minister Paetongtarn Shinawatra said that her government “will do everything in its power to protect the country’s interests” and has signalled its readiness to discuss the issue with the U.S. at the first opportunity in order to address the nations’ trade balance in a manner fair to both parties. The Thai finance minister will travel to the U.S. this week for talks with various sectors on the Trump trade policy.
Indonesia has indicated that it “will not retaliate” and send a high-level delegation to the U.S. to pursue diplomacy and negotiations to find solutions for mutual benefits.
In Cambodia, a spokesperson for the Ministry of Commerce said his country can use its World Trade Organization membership to protest the sharp increase in U.S. tariffs. However, the minister of labor and vocational training said that Cambodia will be able to manage the consequences of the U.S. tariffs, which he believed will have less severe impact on Cambodia’s production costs compared to competing countries. Prime Minister Hun Manet and Minister of Commerce Cham Nimol have respectively sent letters to Trump and U.S. Trade Representative Jamieson Greer, urging a delay in implementation and proposed reducing tariffs on 19 U.S. product categories, lowering their maximum 35 percent rate to 5 percent.
The ability to remain calm and find solutions via diplomacy and dialogue is particularly important in a crisis. The responses by individual ASEAN countries demonstrated that while they were perhaps shocked by the size of the tariffs announced by Trump last week, they have not panicked.
In addition to their bilateral efforts, leaders from Malaysia, Indonesia, Brunei, the Philippines, and Singapore on April 5 held a teleconference in which they discussed a possible joint response by ASEAN to the U.S. tariffs. However, ASEAN needs to think strategically of a long-term solution, taking this as an opportunity to strengthen internal solidarity and integration, boost trade within ASEAN, and even move toward establishing a Southeast Asian common market akin to the European Union. While conditions are not yet sufficient for a common currency zone, ASEAN countries could consider allowing payments in each other’s currencies, boosting digital payment integration, and negotiating FTAs with other regions and external partners under ASEAN’s common trade rules and norms. These issues should be on the agenda of the upcoming meeting of ASEAN economic ministers that is scheduled to take place later this week.
ASEAN also has other reasons to increase its efforts to promote cooperation and integration. Trump’s sweeping set of tariffs appears not to be motivated by U.S.-China competition, given that U.S. partners and adversaries alike were targeted. However, China’s decision to retaliate by imposing a 34 percent tariff on U.S. imports and its determination to “play along to the end” signal that there will be no end in the U.S.-China competition in the Indo-Pacific for the foreseeable future.
As strategic competition between the U.S. and China increases, ASEAN will become increasingly important to both countries. However, ASEAN’s ability to navigate these challenges will hinge on the question of whether its members can act collectively, which will allow it to exercise strategic autonomy in reaction to the behavior of major powers. On their own, ASEAN countries can hardly withstand these pressures and could easily be subjugated by major powers. The U.S. tariff shock is a reminder of the importance of ASEAN unity, something that has often been lacking on important issues.
Nearly six decades after its founding, this remains the best way for ASEAN’s member states to protect their interests is to create a collective strength that will make ASEAN capable of withstanding shocks and even crises or conflicts in the future.
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