European Union potentially faces trade agreement setbacks as Southeast Asia bolsters ties with the United States.
The US has been actively engaging in trade negotiations with several Southeast Asian countries, leading to agreements that could have significant implications for European exports to the region.
US President Donald Trump announced a 19% tariff on goods from the Philippines, up from the 17% rate set in April, while Manila agreed to eliminate levies on US exports. Similarly, the US has imposed a 20% tariff on Vietnamese goods, a significant drop from the 46% initially announced, and will have zero tariffs on products it exports to Vietnam.
Indonesia, on the other hand, has agreed to reduce tariffs on US goods nearly to zero and increase purchases of American products, including $15 billion in energy, $4.5 billion in agricultural products, and 50 Boeing jets.
These US-Southeast Asia trade deals, characterised by imposed reciprocal tariffs (mostly lowered from initially proposed high levels but still substantial, e.g., 19-25%), have complicated implications for European exports to Southeast Asia. While these US agreements aim primarily to enhance US market access in Southeast Asia and reduce transshipment practices linked to China, they indirectly increase competition for European exporters in the region by reshaping trade dynamics and supply chains.
Key points affecting European exports include:
- The US has negotiated deals with Vietnam, the Philippines, Malaysia, Indonesia, and others that include reciprocal tariffs between 19-25%, often with conditions targeting Chinese transshipments through Southeast Asia.
- These deals effectively strengthen the US position in Southeast Asian markets and could restrict China’s import penetration by discouraging transshipment, historically benefiting Southeast Asian countries and, indirectly, European traders using Southeast Asia as a base.
- The US deals make Southeast Asia more economically aligned with the US, potentially disadvantaging European exporters who lack comparable trade frameworks or tariff preferences in the region, increasing their costs and reducing competitiveness.
- Regional manufacturing and supply chains may shift further toward the US due to tariff-related incentives, meaning European exporters might face increased barriers in markets like Vietnam, Malaysia, and Indonesia where US access improves.
- Moreover, US tariffs and trade policies have caused some ASEAN countries to reassess their economic partnerships, possibly favoring US ties over European ones, which could undermine EU trade influence in Southeast Asia in the medium to long term.
In Vietnam, this could affect $1.5 billion worth of European exports. Thailand has stated its intention to maintain tariffs on agricultural imports, and Malaysia is reportedly pushing back on some of Washington's demands. The Southeast Asian countries with which the EU isn't negotiating trade deals - Brunei, Cambodia, Laos, and Myanmar - currently import relatively little from European markets.
The tariff changes were initially scheduled to take effect on July 8, but the White House delayed the deadline until August 1. The EU's exports to Indonesia and Vietnam, worth around 12% of their total exports to these countries, are at risk due to the US's bilateral agreements.
These developments have led some experts, such as Alfred Gerstl, an expert on Indo-Pacific international relations, to suggest that some EU companies may reconsider their plans to relocate their production base to Southeast Asia due to the now higher US tariffs on goods coming from these countries. Chris Humphrey, executive director of the EU-ASEAN Business Council, stated that there will now be pressure on Southeast Asian states to make similar tariff offers to other trading partners, including the EU.
Daniel Balazs, a research fellow, stated that Southeast Asian nations' interest is to maintain diversity in their trade relationships to avoid overreliance on a single actor. The EU exported approximately €94 billion worth of goods to the Association of Southeast Asian Nations (ASEAN) region in 2022. The EU-Vietnam trade was worth €67 billion in 2024, of which €12.3 billion was in European exports to Vietnam. Most European exports to Vietnam already benefit from zero tariffs, thanks to the EU-Vietnam free trade deal.
In summary, the US-Southeast Asia trade deals primarily enhance US export opportunities and impose tariffs that could raise entry costs for European exporters, indirectly limiting their market share growth in Southeast Asia. European exporters may face heightened competition as Southeast Asian countries pivot more toward the US, encouraged by tariff relief and market access deals.
- The US-Southeast Asia trade deals have complicated implications for European exports, as they aim to enhance US market access and potentially disadvantage European exporters due to increased competition and shifting trade dynamics.
- The US has negotiated deals with countries like Vietnam, the Philippines, Malaysia, and Indonesia, imposing reciprocal tariffs between 19-25%, which could impact around €1.5 billion worth of European exports to Vietnam.
- Some ASEAN countries, such as Malaysia and Thailand, have stated their intentions to maintain tariffs on imports or push back on US demands, which could affect European exports to those countries.
- The tariff changes in the US-Southeast Asia trade deals may lead to some EU companies reconsidering their plans to relocate their production bases to Southeast Asia due to higher US tariffs on goods.
- The EU has exported approximately €94 billion worth of goods to the Association of Southeast Asian Nations (ASEAN) in 2022, and maintaining diversity in trade relationships is crucial for Southeast Asian nations to avoid overreliance on a single actor, including the US.
