VARYING IMPACT ACROSS SOUTHEAST ASIA
For now, the impact of the sectoral tariffs will vary across Southeast Asia.
Late on Tuesday, it was reported that the White House had paused its plan for the pharmaceutical tariffs, pointing to ongoing negotiations with pharmaceutical giants such as Pfizer. These companies may earn a few years of reprieve, though countries such as Singapore may still face greater risks in the medium term given its export of patented and branded products.
The immediate concern would be for small furniture manufacturers in countries such as Malaysia and Cambodia, which do not have the resources to relocate production to the US.
More broadly, Southeast Asian governments face an unenviable conundrum: Their main recourse against the higher sectoral tariffs is to continue engaging Washington to try and secure exemptions, but doing so reinforces Washington’s belief that tariffs work and incentivises their continued usage.
The uncomfortable truth is that there is little choice but to continue engaging Washington in the short term. In the medium term, however, governments are creating trade networks that reduce their exposure to US coercion to break this cycle.
For example, Indonesia recently signed free trade agreements with the European Union and Canada, while Vietnam is exploring economic cooperation with the South American MERCOSUR grouping. Singapore also concluded the Future of Investment and Trade (FIT) Partnership with 13 other countries, including Chile and Rwanda.
If Washington truly seeks self-sufficiency, governments could well oblige their wishes in the medium-to-long term and find other markets for their goods. After all, “treat us like we treat you.”
Kevin Chen is an Associate Research Fellow with the US Programme at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore. He writes a monthly column for CNA, published every first Friday.
