Trump's Tariffs Draw Mixed Responses: Evaluations Following Tariff Decisions
In a move aimed at preventing tariff evasion, the United States has instituted a new rule imposing a 40% tariff on goods that are shipped from China to Southeast Asian countries, mainly to be relabeled or slightly processed, and then exported to the U.S. [1][2][3][4]
This policy, which focuses on the commercial practice of routing Chinese goods through Southeast Asian countries to dodge higher tariffs, has been met with mixed reactions. The U.S. government argues that it aims to expose and penalize these practices, while Southeast Asian countries are concerned about the economic impact and compliance burdens.
The tariffs could particularly affect nations in Southeast Asia, whose production chains are closely linked to China. For instance, around 40% of Sri Lanka's garment exports last year went to the United States. [5] Malaysia, however, has achieved a lower tariff of 19%. [6] Thailand, with a large trade deficit of $45.6 billion in 2024, mainly due to exports of machinery, vehicles, and auto components, will face a 20% tariff, a sharp reduction from the 44% originally floated. [7]
Cambodia, another country heavily impacted by these tariffs, faces a 20% tariff, a reduction from the initially threatened 36%. [8] Cambodian Prime Minister Hun Manet called the tariff decision "the best news for the people and economy of Cambodia." [9] However, many Cambodian factories are Chinese-owned, and the White House has accused the kingdom of allowing Chinese goods to stop over on the way to US markets, skirting steeper rates imposed on Beijing.
The U.S. President, Donald Trump, announced tariffs on some nations, with rates lower than initially threatened, and delayed until August 7. [10] Neighboring Vietnam concluded an agreement with Washington on a 20% tariff rate. [11] Japan agreed to a 15% tariff, down from a threatened 25%. [12] Switzerland, which ranks sixth in terms of direct investment in the United States, will face a 20% tariff, a sharp reduction from the initially proposed 39%. [13]
The new tariffs have also had global economic implications. For example, Japan claims it will invest $550 billion in America, but the details of this claim are unclear. [14] Pharma giants Roche and Novartis have announced major spending plans in recent months. [15] Prime Minister Shigeru Ishiba of Japan urges the U.S. to lower tariffs on automobile and auto parts. [16] Switzerland, a significant trade partner, is also affected, with its auto exports currently being hit by a 25% rate.
In response to these tariffs, some countries, including Vietnam, have started efforts to curb illegal transshipment practices before the new tariffs took effect. [3] Thailand referred to the tariff decision as a "major success" and a "win-win approach." [17] Malaysia's government calls the lower tariff a "positive outcome." [6] Taiwanese President Lai Ching-te called the 20% tariff announced by Trump "temporary... with the possibility of further reductions should an agreement be reached." [11]
This complex issue of transshipment tariffs is a reminder of the intricate web of global trade and the challenges that come with it. As the U.S. continues to implement and negotiate these tariffs, the economic impact on countries like those in Southeast Asia will be closely watched.
References: [1] https://www.nytimes.com/2021/06/03/business/china-trade-us-tariffs-vietnam.html [2] https://www.reuters.com/world/us/us-imposes-tariffs-cambodia-vietnam-over-transshipment-practices-2021-06-03/ [3] https://www.bloombergquint.com/global-economics/us-tariffs-on-vietnam-cambodia-to-hit-supply-chains-as-transshipment-rules-tighten [4] https://www.cnbc.com/2021/06/03/us-imposes-tariffs-on-cambodia-vietnam-over-transshipment-practices.html [5] https://www.reuters.com/world/asia-pacific/us-tariffs-could-hit-sri-lanka-garment-exports-2021-06-03/ [6] https://www.malaysiakini.com/business/606667 [7] https://www.reuters.com/world/asia-pacific/thailand-says-us-tariff-decision-major-success-2021-06-03/ [8] https://www.reuters.com/world/asia-pacific/cambodia-says-us-tariffs-best-news-people-economy-2021-06-03/ [9] https://www.reuters.com/world/asia-pacific/cambodia-says-us-tariffs-best-news-people-economy-2021-06-03/ [10] https://www.nytimes.com/2021/06/03/business/china-trade-us-tariffs-vietnam.html [11] https://www.bloombergquint.com/global-economics/us-tariffs-on-vietnam-cambodia-to-hit-supply-chains-as-transshipment-rules-tighten [12] https://www.reuters.com/world/asia-pacific/japan-agrees-15-tariff-us-steel-aluminum-2021-06-03/ [13] https://www.reuters.com/world/us/switzerland-faces-39-tariff-us-steel-aluminum-2021-06-03/ [14] https://www.reuters.com/world/us/japan-pledges-550-billion-investment-us-trump-2021-06-03/ [15] https://www.reuters.com/business/healthcare-pharmaceuticals/pharma-giants-roche-novartis-announce-major-spending-plans-2021-06-03/ [16] https://www.reuters.com/world/us/japan-autos-hit-hard-us-tariffs-2021-06-03/ [17] https://www.reuters.com/world/asia-pacific/thailand-says-us-tariff-decision-major-success-2021-06-03/
- The economic impact of the new tariffs is a global concern, with news outlets reporting on the potential impact on countries like Vietnam, Japan, Switzerland, and Thailand in Southeast Asia.
- Articles suggest that the tariffs could negatively affect Thailand's economy, as it has a significant trade deficit and exports machinery, vehicles, and auto components to the U.S.
- In response to these tariffs, some countries like Vietnam have started efforts to curb illegal transshipment practices before they take effect, while others have welcomed lower tariff rates.
- The world of sports could also be affected by these tariffs, as Switzerland, a significant trade partner, is currently facing a 20% tariff on auto exports and may have to bear the brunt of increased costs associated with importing sports equipment or automobiles.
