Importance Score: 85 / 100 🟢
Southeast Asia Grapples with Impact of US Tariffs
President Trump’s widespread tariffs, impacting numerous nations globally, have taken effect, with Southeast Asian countries, particularly Vietnam and Cambodia, experiencing a significant economic impact second only to China. These tariffs represent a significant escalation in global trade tensions and pose new challenges for export-dependent economies in the region.
Disproportionate Tariff Rates Across Southeast Asia
Vietnam and Cambodia face some of the most substantial levies, at 46% and 49% respectively. Other Southeast Asian nations also encounter considerable tariffs, including Thailand (36%), Indonesia (32%), Malaysia (24%), the Philippines (17%), and Singapore (10%).
Export-Dependent Economies Under Pressure
These tariffs pose a significant challenge to Southeast Asia, a region heavily reliant on international trade. Export-led growth has been a cornerstone of its impressive economic progress over the last thirty years, particularly through sales to the United States.
Exports to the US constitute a large portion of some nations’ economies, accounting for 23% of Vietnam’s GDP and a substantial 67% of Cambodia’s GDP.
This economic trajectory is now threatened by the punitive measures imposed by Washington.
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The enduring consequences of these tariffs, assuming their continuation, will vary across the region but undoubtedly present considerable obstacles for the governments of Vietnam, Thailand, and Cambodia in particular.
Vietnam’s Diplomatic Tightrope Walk
Vietnam’s delicate “bamboo diplomacy,” aimed at fostering amicable relations and balancing ties with both China and the US, is now facing a critical test.
Under the leadership of Communist Party Secretary-General To Lam, Vietnam has launched an ambitious initiative to develop into an upper-income, technology-driven economy by 2045, targeting annual growth rates exceeding 8%.
Increased exports to the US, already its primary market, were central to this strategic plan.
This ambition was a key factor in Vietnam’s decision to elevate its relationship with the US to a Comprehensive Strategic Partnership in 2023.
The Communist Party, which maintains tight control and faces no formal political opposition, relies on economic promises for legitimacy. These targets, already considered ambitious by many economists, now face even greater hurdles.
Impact on Thailand and Cambodia’s Stability
Thailand’s dependence on US exports is less pronounced than Vietnam’s, at under 10% of GDP. However, the Thai economy is currently facing significant challenges, having underperformed for the past decade. The Thai government is actively seeking to stimulate economic expansion, and these tariffs represent another economic setback.
For Cambodia, the tariffs potentially pose the most significant political risks in the region.
The administration of Hun Manet, while demonstrating similar authoritarian tendencies to his predecessor and father Hun Sen, is potentially vulnerable.
Maintaining the Hun family’s grip on power has involved granting economic advantages to rival factions, which has contributed to an oversupply of property developments and widespread discontent over land seizures.
The garment sector, employing 750,000 individuals, has served as a crucial social safety net, providing stable incomes for many of Cambodia’s poorest citizens. Thousands of these jobs are now at risk due to the US tariffs.
Southeast Asian Nations Seek Negotiation, Not Retaliation
In contrast to China’s retaliatory tariffs, the official response from Southeast Asian governments emphasizes negotiation and de-escalation.
Vietnam has dispatched Deputy Prime Minister Ho Duc Pho to Washington to advocate for the country’s position and has proposed eliminating all tariffs on US imports. Thailand intends to send its finance minister to make a similar appeal, offering to reduce tariffs and increase purchases of American goods, including food and aircraft.
Malaysian Prime Minister Anwar Ibrahim is also scheduled to visit Washington, although Malaysia, with US exports constituting 11% of its total exports, is less severely affected than some neighboring countries.
However, the Trump administration appears uninclined to compromise.
Peter Navarro, a senior trade advisor in the Trump administration, dismissed Vietnam’s zero-tariff offer as insufficient, arguing it fails to address the trade imbalance where Vietnam exports significantly more goods to the US than it imports.
He accused Vietnam of maintaining numerous non-tariff barriers and alleged that a significant portion of Vietnamese exports to the US are actually Chinese goods rerouted through Vietnam.
Independent trade analyses estimate the proportion of Vietnamese exports linked to tariff avoidance to be between 7% and 16%, considerably lower than the one-third figure cited by Navarro.
Desperate Appeals and Ironic Twists
Similar to Vietnam, the Cambodian government has requested the US to postpone the tariffs to facilitate negotiations.
The American Chamber of Commerce in Cambodia has urged the removal of the 49% tariffs, highlighting the severe impact on the Cambodian garment industry while noting that these tariffs are unlikely to incentivize a return of clothing manufacturing to the US.
Perhaps the most paradoxical tariff is the 44% levy on Myanmar, a nation embroiled in civil conflict with minimal capacity to increase imports from the US.
US exports constitute a negligible fraction of Myanmar’s GDP, less than 1%.
However, as in Cambodia, the garment sector provides essential income for vulnerable families in Myanmar’s urban areas.
Ironically, President Trump had previously enjoyed considerable popularity in Southeast Asia.
He has been admired in Vietnam for his assertive foreign policy approach and Cambodia’s former leader Hun Sen had actively cultivated a close relationship with the US president.
Just last month, Cambodia publicly commended President Trump for curtailing the operations of US media outlets Voice of America and Radio Free Europe within Cambodia.
Now, Cambodia, along with many of its neighbors, finds itself among the nations appealing to President Trump to alleviate the burden of these newly imposed tariffs.