After months of speculation, Donald Trump has gone far harder with his so-called “reciprocal tariffs” than many thought was likely, given the economic damage this move will cause to the United States itself.
In the choice over what tariff rates to impose, this seems to have largely been determined by the size of America’s trade deficit with individual economies. There is no serious attempt to present Trump’s tariffs as linked to the tariffs imposed by other countries on the United States, or the impact of other policies and regulations that the administration dislikes.
Massive tariffs will be applied on Asia and the European Union. China will be hit by 34% tariffs, Cambodia 49%, Malaysia 47%, Vietnam 46%, Thailand 36%, and Indonesia 32%.
Advanced Asian economies are also hit substantially with tariffs of 32% for Taiwan, 25% for South Korea, and 24% for Japan.
The EU faces a 20% tariff.
The Trump administration seems to care little for supply chain diversification as opposed to a crude attempt to force manufacturing back onto US soil.
Perhaps the only positive news in Trump’s announcement was that Canada and Mexico would be exempt from the new tariffs (though still subject to their own specific Trump tariffs). For everyone else, a minimum baseline 10% tariff will be applied (Australia is in this group).
The size and structure of the reciprocal tariffs also reinforce that this will come at a high economic cost for the United States. By imposing such exorbitant tariffs across all major Asian exports plus the EU, the American economy will be left with few alternative options for sourcing what it needs. That’s especially so when it comes to electronics, where Asia is dominant.
For instance, the tariffs Trump imposed on China during his first term at least allowed supply chains to reconfigure as trade was shifted to the next most competitive production locations, generally in Asia plus Mexico. That process helped contain the economic costs of the tariffs for America while creating opportunities for other economies, notably in Southeast Asia. Not so this time.
Indeed, that seems the intention. Trump and his advisers clearly take issue with US trade deficits with any country, not just China. There is also a lot of concern that other countries were merely serving as sources of indirect or “hidden” Chinese imports, though as my research published in The Interpreter last month on Vietnam illustrated, the case for that was grossly overblown. And the Trump administration seems to care little for supply chain diversification as opposed to a crude attempt to force manufacturing back onto US soil.
Garment factory workers in Ho Chi Minh City (Huu Khoa/AFP via Getty Images)
Garment factory workers in Ho Chi Minh City (Huu Khoa/AFP via Getty Images)
Mexico still stands as a potential low-cost manufacturing hub. But it will only be able to absorb so much and the Trump administration in any case also takes issue with Mexico’s own trade surplus and the presence of Chinese firms in its supply chains.
Southeast Asia is arguably the biggest loser in all of this. For some, the tariffs are truly seismic. Exports to the United States are worth about 27% of GDP in Vietnam and Cambodia. Malaysia and Thailand are also badly exposed. Southeast Asian economies were also among the principal beneficiaries as supply chains shifted out of China due to Trump’s first-term tariffs and escalating geostrategic tensions. That opportunity now looks largely over. Instead of getting a boost, the entire export-driven development model of the region is now at serious risk.
The fact that the Trump administration is so squarely focused on trade deficits suggests there may also be limited room for these countries to negotiate their way out. Vietnam and Cambodia, for instance, each run trade surpluses with America equal to about 25% of their GDP. For Malaysia and Thailand, the figures are 6% and 8%. Tiny internal markets relative to the United States mean there is likely little they can do to seriously close this gap even by artificially raising imports from the United States, at least not while maintaining export-driven economies.
This brings us to the question of what comes next. The baseline 10% tariffs are set to take effect over the weekend, while the higher rates for specific countries will be applied from 9 April. That leaves little time for any meaningful negotiation. Major economies including the EU and China will likely retaliate. Smaller countries like those in Southeast Asia are unlikely to do so. Treasury Secretary Scott Bessent has urged countries not to retaliate, while suggesting the administration would “let things settle for a while” before resuming negotiations.
That brings us to the final big issue with Trump’s reciprocal tariffs. Some hoped that “liberation day”, as the administration dubbed the announcement, would reduce the immense uncertainty hanging over the US economy, which was itself creating a great amount of unnecessary economic damage. That seems unlikely. Negotiations, tit-for-tat retaliation, and the chance that Trump ultimately backs down means that uncertainty will only continue. Along with the economic damage.