A container is loaded onto a cargo ship while docked at Hai Phong port, Vietnam, on April 16.Athit Perawongmetha/Reuters
Even during the first Donald Trump administration, the idea of China and Vietnam striking trade deals with the U.S. while South Korea and Japan struggled to get an audience in Washington would have raised eyebrows. But Mr. Trump’s second term has been full of surprises.
Late last month, China agreed to resume rare earth exports to the U.S. as part of high-level negotiations in which both sides reduced stringent tariffs against each other, backing away from a complete economic decoupling.
On Wednesday, Vietnam agreed to a 20-per-cent tariff on exports to the U.S., significantly lower than the 46 per cent threatened by Mr. Trump when he announced his “Liberation Day” measures in April, which have been on pause but are due to come into force next week.
Other Asian countries have been jostling to secure their own deals since Mr. Trump’s announcement, but have struggled to make headway as the U.S. leader negotiates with dozens of countries one-by-one, while also juggling multiple world crises.
“It’s causing a lot of anxiety and underpinning a lot of the export activity we’ve seen in the last couple of weeks and months,” said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit based in Hong Kong. “A lot of shippers and importers are front-loading their goods to reach the U.S. before the tariff snapback.”
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Both Japanese Prime Minister Shigeru Ishiba and South Korea’s newly elected President Lee Jae Myung had hoped to get significant face time with Mr. Trump on the sidelines of the G7 summit in Canada last month, but were derailed when he returned to Washington early to respond to Israel’s war with Iran.
That snub was repeated by Mr. Trump’s Secretary of State, Marco Rubio, who has cancelled plans to visit Japan and South Korea next week in order to attend a meeting between Mr. Trump and Israeli leader Benjamin Netanyahu. Mr. Rubio is still expected to attend a summit of the Association of Southeast Asian Nations in Malaysia, where he could face multiple ministers from countries suddenly grappling with Mr. Trump’s tariffs – if they come into force as promised.
Cambodia and Laos, among ASEAN’s poorest members, are up against the toughest measures, with Washington threatening tariffs of 49 and 48 per cent respectively, a potentially devastating blow to two export-focused economies. Thailand and Indonesia are also facing tariffs of more than 30 per cent.
As the deal with Vietnam shows, Asian countries are also facing a tricky balance in talks with Washington, as U.S. negotiators push for measures that further ramp up pressure on China, despite the recent breakthrough in talks with Beijing.
While most Vietnamese exports to the U.S. will face a 20-per-cent tariff, goods classified as transshipments are subject to double that. The higher rate is designed to target Chinese exporters who have increasingly used Vietnam and other neighbouring countries as a way to avoid U.S. tariffs.
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Indonesia, Malaysia and Thailand are equally as dependent on economic ties with China as with the U.S. and would be extremely cautious about angering Beijing – which has previously made clear it will not take kindly to countries that put it at a disadvantage in order to strike an agreement with Washington.
Mr. Marro said the 40-per-cent transshipment rate agreed with Vietnam likely indicates the U.S. will not reduce its tariffs on China beyond that, but noted this also suggests negotiators may be agreeable to reducing duties on other countries below 40 per cent if they sign on to a similar measure targeting transshipments.
Two countries that are far more skeptical about China, but have nevertheless struggled to make headway with Mr. Trump, are Japan and South Korea.
Speaking in Seoul on Thursday, Mr. Lee said negotiations had “not been easy” and acknowledged that a deal may not be struck ahead of the July 8 deadline. Despite this, South Korea is sending its trade team to Washington over the weekend to try and clinch a last-minute agreement.
Securing the same for Japan seems unlikely, with Tokyo surprising U.S. negotiators by not rolling over to Mr. Trump’s demands, angering the President, who has posted several times on social media attacking Japan, including mocking the country’s ongoing rice shortage and complaining it does not import enough U.S. cars.
“We’ve dealt with Japan. I’m not sure if we’re gonna make a deal, I doubt it, with Japan,” Mr. Trump told reporters on Tuesday. “They and others are so spoiled from having ripped us off for 30, 40 years that it’s really hard for them to make a deal.”
While Japan was due to face a 24-per-cent tariff under the “Liberation Day” measures – along with other levies on car and steel exports – Mr. Trump suggested Tokyo and other holdouts could be slapped with whatever measure he deems fit on the day.
“What I’m going to do is, I’ll write them a letter to say, ‘We thank you very much, and we know you can’t do the kind of things that we need, and therefore you pay a 30 per cent, 35 per cent or whatever the number is that we determine,’” he said.
A change of this degree at the last minute “runs a really big risk of undermining the credibility of his own trade negotiators,” Mr. Marro said.
He added the general assumption was that cooler heads will prevail and “higher tariffs are more bluster than policy,” but noted that if Mr. Trump were to follow through on his threats, it could have a devastating effect.
“The environment is still incredibly uncertain but what is certain is that if the U.S. were to move forward with very high duty rates on most of its major trade partners, that would result in a significant disruption to the global economy, not just for Asian exports, but also U.S. consumers who have until now largely avoided the fallout of these tariffs.”
Editor’s note: This article has been updated to correct the spelling of the South Korean President's name.