Asian economies scramble to appease Trump as the U.S. president ratchets up

As the specter of Donald Trump’s reciprocal tariffs looms, several Asian economies that enjoy substantial trade surpluses with Washington are scrambling to negotiate favorable solutions with the U.S president to prevent being slapped with higher duties.

Trump said Friday that he would announce reciprocal tariffs — duties that match those levied on U.S. goods by respective countries — as soon as Tuesday, to take effect immediately. Trump did not identify which countries will be hit but indicated it would be a broad effort to help eliminate U.S. trade deficits.

While the details remain unclear, “it is likely that U.S. import tariffs will rise for most emerging Asian economies,” a team of analysts at Barclays said Monday, with the exceptions of Singapore and Hong Kong, with which the U.S. enjoys trade surpluses.

Based on World Trade Organization estimates, most economies in Asia apply higher average tariffs on imports compared with the U.S. as of 2023. India led with a 17% simple average rate on countries with the most-favored-nation status, compared with the U.S. that levies 3.3%. The U.S. enjoys MFN status with most major economies, except Russia. 

China topped trade surplus with the U.S. last year at $295.4 billion, followed by Vietnam’s $123.5 billion, Taiwan’s $74 billion, Japan’s $68.5 billion and South Korea’s $66 billion, according to U.S. Census bureau.

“Just because these economies have dodged tariffs for now, [it] doesn’t mean they can breathe easy,” Stefan Angrick, senior economist at Moody’s Analytics told CNBC, stressing that “Washington’s mood could shift and tariffs could still be imposed later.”

These countries, except for Vietnam, were spared in Trump’s opening tariff salvo thanks to their deep security ties with Washington and large investments in the U.S., Angrick said, but “they shouldn’t get too comfortable.”

Vietnam’s trade surplus with the U.S. soared nearly 18% annually to a record high last year. The country’s simple average tariff rate on MFN partners stood at 9.4%, according to WTO data.

Beverages and tobacco imported into the country face up to 45.5% tariffs on average, while categories such as sugars and confectionery, fruits and vegetables, clothing and transport equipment are subjected to tariffs between 14% and 34%.

Trump, who in 2019 called Vietnam “almost the single worst abuser“ of trade practices, has not made any public remarks about the nation after his re-election in November.

Hanoi has made efforts in recent months to find compromises with Washington on trade. In November, the country vowed to buy more aircraft, liquified natural gas and other products from the U.S.

Vietnamese Prime Minister Pham Minh Chinh last week asked Cabinet members to prepare for the impact of a possible global trade war this year.

Vietnam was a major beneficiary of the trade barriers Trump imposed on Beijing in his first term, which spurred manufacturers to shift production out of China. Consequently, the Southeast Asian nation became one of the largest recipient of foreign direct investment from China.

The U.S. may double its tariffs on Vietnam to 8% if it enforces “full tariff reciprocity,” Michael Wan, senior currency analyst at MUFG Bank said in a note on Monday. That said, he expects a less extreme U.S. stance on the country, with “some sector-specific tariffs” as a more likely possibility.

New Delhi in its union budget earlier this month reduced tariffs on a range of products including motorcycles, electronic goods, critical minerals and lithium ion batteries. Finance Secretary Tuhin Kanta Pandey said in an interview that “we are signaling that India is not a tariff king.”

Indian Prime Minister Narendra Modi is reportedly prepared to discuss further tariff cuts across a dozen sectors and buying more energy and defense equipment from the U.S. at his meeting with Trump later this week.