Trade, Rates and Trump in Southeast -Asia

The Trump administration unveiled its long-awaited rates last week over most of the world and they are just as much excited as you would expect. Countries will see rates on export to the United States ranging from 10 to almost 50 percent. Southeast -Asia is particularly seriously affected. Vietnam looks at a rate of 46 percent, 36 percent of Thailand, and Indonesia 32 percent. Cambodia and Laos see rates of almost 50 percent.

It seems that the Trump government has arrived until these figures arrived by taking the existing trade deficit that the United States has with each country and distributing how much the import of the United States from that country. They then took that relationship and halved it to distract the tariff amount. Apparently they only include trade in goods and no services. If you find this difficult to follow, as I did, it is because it is not logical. But whether it is logical or not, is it happening for the time being. So why does it happen and what does it mean?

First, let’s try to understand the reason here, as it is. The idea is that the US absorbs a lot of output from the rest of the world, and that is why it manages trade shortages with many countries. Americans buy things that are made in other countries and therefore produce less at home. By making it unaffordable for the US to import foreign products, domestic production will increase. There are many things wrong with this, but it is the logic that Donald Trump uses to justify these actions.

It is wrong because the global trade and value chains are more complicated than that. Let’s look at Cambodia, a small country that is confronted with a rate of 49 percent on exports to the United States. The Trump team claims that Chinese products are often produced in or re -exported from Cambodia (and Vietnam and Laos) to avoid American trade sanctions for China. Even if that is true, Cambodia only did $ 9.7 billion WORTH OF EXPORT For the US in 2023, which is not consistent in view of the total size of the US economy and trading activity. However, it is very consistent for Cambodia, where GDP was in 2023 Only $ 42 billion.

But let’s say, as a thought experiment, that Trump’s theory is correct and by applying a rate of 49 percent to Cambodia, all these goods would now be produced in the US in the US. What did Cambodia export to the United States in 2023? Almost half ($ 4.2 billion) was textile, such as sweatshirts. Another $ 1.3 billion was for trunks and business. These are the type of labor -intensive products with low added value that the United States does not want or do not want to produce easily, especially at a costs that are comparable to Cambodian manufacturers.

Another thing that Trump’s model of global commercial missers is that not all trade is in end products. Many of them are intermediate goods that are used to make end products. Even if a high -quality product such as a car is assembled in the United States, many of the components make it to make it from all over the world will be imported.

For example, Cambodia exported $ 2 billion in semiconductor devices to the US in 2023. These were probably used to make other electronic products and systems. Now American companies that received these parts from Cambodia (or Vietnam or Thailand or Malaysia) will have to take care of them something else, or another country with a lower rate percentage or inland, if they are even produced in America, which they may not be.

Building a new production capacity requires large investments of both time and money. Anyway, it will disrupt existing production networks and increase the costs, while it reaches little. I focused on Cambodia here, but we could break the trade tires between the US and almost any other Southeast Asian country and come to similar conclusions.

There is a good chance that much of it will be declined, especially because the financial markets are Not happy with the rates. The US will probably try to protect some concessions from each country, then lower the rate and defend it as proof of the Trump’s deal deal. We are already seeing this starting to unfold. In reality, this is the opposite of good policy because it will create uncertainty and confusion, while at the same time not achieving any of the goals stated, such as more domestic production or a lower American trade deficit.

In the process, it has already caused enormous and probably irreversible damage to the image and relations of America abroad. Many countries in Southeast Asia have built up their economies around exports and the US has long been a reliable market for these goods. The Thai economy is already struggling with an economic delay and is being punished with punitive rates for running a bilateral trading surplus of $ 45 billion with the United States last year will make it worse. Even if the rates are ultimately lowered or vice versa, the damage is caused.

The US has sent the world an unmistakable message that it can no longer be familiar with policy that is determined by the incoherent grilling of a whimsical leader. Many countries started looking for more reliable partners somewhere else, and these actions will lock that process even further in place. Instead of flourishing in domestic production, the United States will in all probability be more isolated, with less influence in fast-growing and geo-strategically important regions such as Southeast Asia and with its large global trade shortage still intact.