Trump’s Tariff Reversal: An Opportunity for Trade Realignment in Southeast Asia

The global economy experienced significant upheaval on 2 April 2025 when US President Donald Trump declared “Liberation Day”, imposing sweeping tariffs on imports from over 180 countries and territories. This resulted in an average global tariff hike of 41 per cent to the US, framed as a corrective measure against unfair trade practices against it. But this could be an opportunity for Southeast Asia to expand global partnerships and strengthen its voice in international trade.

East and Southeast Asia — home to many of the world’s most competitive export economies — bore the brunt of the tariffs. China was hit with 34 per cent, Japan 24 per cent, and South Korea 25 per cent. Vietnam, which has seen explosive export growth to the US in recent years, faced a steep 46 per cent. Indonesia and Taiwan received 32 per cent, Malaysia 24 per cent, and the Philippines 17 per cent. The only ASEAN exception is Singapore, where the US has a trade surplus, but is being imposed with a baseline tariff of 10 per cent. Even the least developed countries in the region — Laos, Cambodia, and Myanmar — were not spared, with tariffs exceeding 40 per cent.

The tariffs were purportedly based on the rates other countries impose on the US, including considerations of “currency manipulation and trade barriers”. Despite claims of reciprocity, the tariff calculations lacked transparency. Some countries with large trade surpluses faced higher US tariffs, while others received a flat 10 per cent hike.

President Trump’s claim that long-standing US trade deficits stem from unfair trade is fundamentally flawed. While such practices may play a role, trade deficits are shaped by broader factors like domestic savings, investment levels, and consumer demand. Imposing universal tariffs as a fix is misguided and risks triggering far-reaching economic costs at home and abroad.

The response has been swift and mixed. The European Union (EU) reportedly prepared counter-measures, criticising the tariffs as violating World Trade Organization rules. Vietnam opted for diplomacy, proposing to eliminate tariffs on US goods, though Washington deemed the move insufficient. Indonesia announced its willingness to reform its non-tariff barriers and import more US goods. China is the only country that has responded in kind, initially imposing 34 per cent tariffs on all US imports, then raising them to 84 per cent, and now to 125 per cent.

But in a dramatic about-face just one week later, on 9 April, Trump announced a 90-day suspension on “reciprocal” tariffs (except for China) following pressure from American business leaders and investors worried about the US heading into recession.

While the general tariff was temporarily reduced to 10 per cent, punitive tariffs on Chinese imports were sharply increased by 145 per cent, reaching up to 245 per cent. The administration justified the hike by citing Beijing’s “disrespect” and retaliatory trade measures. Just days later, Trump made another controversial move by exempting a range of electronic goods from the reciprocal tariffs.

This unpredictable trade environment is a wake-up call for countries that rely heavily on global trade, especially the US market.

The abrupt shifts triggered market volatility and heightened global uncertainty, disrupting sourcing and long-term planning. Firms were forced to make rapid and costly adjustments that rippled across supply chains and investments.

Nike, for instance, has been considering relocating production from Vietnam and Indonesia to the Philippines, which received a lower tariff under the initial announcement. Apple was also reported to have expedited shipments of iPhones and other products from India and China to the US to avoid tariff hikes. 

For most ASEAN countries, tariffs have reverted to pre-Liberation Day levels but with an added 10 per cent burden likely to be passed on to US consumers. Yet, ASEAN’s close integration with China also means that disruptions to Chinese trade will traverse the region.

This unpredictable trade environment is a wake-up call for countries that rely heavily on global trade, especially the US market. Trump’s unilateral actions demonstrate that even long-standing allies can be targeted, and that rules or trade agreements can be reshaped without warning.

Southeast Asian nations are now seeking to diversify their trade partnerships to mitigate the US trade policies. This diversification includes strengthening economic ties with China under the Regional Comprehensive Economic Partnership.

However, closer engagement with China presents another challenge. The influx of Chinese goods would negatively impact local industries. Indonesia’s textile sector, for example, reported over 50,000 job losses resulting from factory closures due to intense competition with cheap Chinese goods, even before the tariff hike. To safeguard their economies, Southeast Asian countries can adopt defensive measures, including anti-dumping duties, safeguard tariffs, or import restrictions to protect vulnerable industries.

Deepening economic ties with Latin American countries could also offer an alternative route to access the North American market and enhance supply chain flexibility, while Indonesia’s move to accelerate the completion of a Comprehensive Economic Partnership Agreement with the EU exemplifies the kind of initiative that could be scaled up to the ASEAN level. 

Beyond short-term trade measures, strengthening domestic competitiveness through structural reforms, such as streamlining regulations, improving infrastructure, and enhancing the investment climate, is essential. These efforts help attract quality foreign direct investment and support domestic firms in adapting to global market shifts and participating more effectively in regional value chains.

ASEAN should seize this moment to deepen trade integration both within the region and beyond. Expanding and diversifying trade partnerships will be critical to responding to upheavals. This will also reinforce ASEAN’s strategic importance in an increasingly fragmented global landscape.

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