What New Trade Deals Mean for Asia: Trump’s Tariff Strategy Unfolds

US Trade Deals with Asia: A Shift in Tariff Strategy

Bangkok: President Donald Trump has unveiled new trade agreements with Japan and several other Asian nations, aimed at easing the burden of rising tariffs on exports to the United States for both businesses and consumers.

Ongoing negotiations with China are in progress, with US Treasury Secretary Scott Bessent indicating that the August 12 deadline might be extended to facilitate further discussions.

Despite these developments, high tariffs on US imports of steel and aluminum remain in place, and countries like South Korea and Thailand are still working towards finalizing their agreements. Economists predict that these tariffs will negatively impact growth across Asia and globally.

The agreements reached thus far come ahead of Trump’s August 1 deadline.

In a recent announcement, Trump and Japanese Prime Minister Shigeru Ishiba revealed a deal that will reduce tariffs on US imports from Japan to 15 percent, down from the initially proposed 25 percent.

This news was welcomed by automakers such as Toyota and Honda, whose stock prices surged significantly in Tokyo. Additionally, trade agreements were also announced with the Philippines and Indonesia.

Following discussions with Philippine President Ferdinand Marcos Jr., Trump stated that the import tax on products from the Philippines would be set at 19 percent, a slight reduction from the previously threatened 20 percent tariff.

Indonesia will also see a tariff of 19 percent, down from a previously suggested 32 percent, and has agreed to remove nearly all trade barriers for American imports.

Earlier, Trump indicated that Vietnam's exports would incur a 20 percent tariff, with a higher rate for goods transshipped from China, although no formal announcement has been made.

The deadline for negotiations with China is approaching, but Bessent mentioned that it is likely to be extended. Another round of talks is scheduled to take place in Sweden next week.

Trump hinted at a potential visit to China soon, aiming to stabilize trade relations between the two nations.

A preliminary agreement from June allowed China to ease some restrictions on its exports of rare earth minerals, essential for high-tech manufacturing.

In May, the US reduced Trump's initial 145 percent tariff on Chinese goods to 30 percent for a 90-day period, while China agreed to lower its 125 percent tariff on US goods to 10 percent.

This temporary relief enabled companies to expedite shipments to avoid higher tariffs, boosting Chinese exports and alleviating some pressure on its manufacturing sector. However, ongoing uncertainty regarding Trump's future actions has made companies hesitant to invest further in China.

As the August 1 deadline looms, pressure is mounting on various Asian countries to finalize trade agreements.

Trump has communicated via letters, shared on Truth Social, that countries failing to reach agreements will face increased tariffs. He warned that retaliatory measures could lead to even higher tariffs.

South Korea's tariff is set at 25 percent, while imports from Myanmar and Laos will be taxed at 40 percent. Cambodia and Thailand will face a 36 percent tariff, with Serbia and Bangladesh at 35 percent, and South Africa and Bosnia and Herzegovina at 30 percent. Kazakhstan, Malaysia, and Tunisia will see a 25 percent tariff.

The status of negotiations with India remains uncertain, with progress likely dependent on the country's heavily protected agricultural sector, which faces a 26 percent tariff.

Since April, nearly all countries have been subjected to a minimum 10 percent levy on goods entering the US, in addition to other sector-specific tariffs.

Economists predict that even with trade agreements, tariffs will hinder growth.

Despite Trump easing some of his most severe tariff threats, the ongoing uncertainty and increased costs for manufacturers and consumers have raised concerns about the regional and global economy. Growth estimates for 2025 and beyond have been downgraded.

The Asian Development Bank announced a reduction in its growth forecast for developing Asia and the Pacific to 4.7 percent in 2025 and 4.6 percent in 2026, reflecting a decrease of 0.2 and 0.1 percentage points, respectively.

The outlook for the region could worsen due to escalating tariffs and trade tensions. Other risks include geopolitical conflicts that could disrupt global supply chains and increase energy prices, as well as a decline in China's struggling property market.

Economists at AMRO are even less optimistic, projecting growth for Southeast Asia and other major Asian economies at 3.8 percent in 2025 and 3.6 percent in the following year.

While countries in the region are taking steps to shield their economies from Trump's trade policies, they continue to face significant uncertainties, according to AMRO's chief economist, Dong He.

"Uneven progress in tariff negotiations and the potential expansion of tariffs to additional products could further disrupt trade activities and hinder growth in the region," he stated.