The significant increase in tariffs promised by Donald Trump during his campaign will have substantial consequences for economies across Asia. While China is the primary target, all countries will feel the effects of this “trade war.”
Asia is holding its breath. Trump’s return to the White House in January, along with his so-called “America First” policy, will have a significant impact on trade across the continent, reports Channel News Asia.
In an interview with the Singaporean news site, Steven Okun from the consulting firm Apac Advisors states: “What we will see is a much more aggressive America First policy than last time [during Trump’s first term from 2017 to 2021].”
Punitive tariffs “at a level not seen for decades” are being considered by the upcoming Republican administration. These would apply to specific products like steel or aluminum, or to all foreign goods. China is the main target of Trump’s focus, but other countries with significant trade deficits with the United States—such as Vietnam and Malaysia—could also be adversely affected, the media outlet details.
During his campaign, Trump promised “tariffs of up to 20% on imports from all countries.” Chinese products could face tariffs exceeding 60%.
The Fragile Chinese Economy
“Chinese manufacturers are preparing to face stronger headwinds during this second term,” says Nikkei Asia. “China’s economic position appears more fragile” compared to what it was during Trump’s first term.
Overall, trade ties between the United States and China have weakened since 2017. In that year, Chinese products accounted for 22% of total U.S. imports, but that figure dropped to 14% in 2023. Last year, the U.S. trade deficit with China was the lowest recorded in a decade, notes Nikkei Asia.
Trump’s obsession with reducing his country’s dependency on China comes at a delicate moment for the Chinese economy, the publication continues. “Domestic demand in China has not taken over [from the drop in exports], […] the slowdown in the housing sector persists, and […] consumer confidence is declining.”
On Friday, November 8, Beijing is expected to unveil a “vast budget stimulus plan that could amount to 10 trillion yuan (€129 billion), primarily to alleviate the debt burden of local governments and recapitalize banks.” The timing of this announcement is no coincidence: Beijing seems to have awaited the results of the U.S. elections.
“However,” notes Nikkei Asia, “the authorities have not done much to support consumption or sustainably stimulate exports. High tariffs could hit manufacturers already working with increasingly reduced margins.”
Collateral Damage
Trump’s policy towards China will undoubtedly have a direct impact on U.S. allies in the region (Japan, Korea, and the Philippines), observes Chong Ja Ian, a political scientist at the National University of Singapore, in an interview with Channel News Asia: “They will need to be mindful of the collateral effects of U.S. tariffs on their neighbor and main partner, China.”
In Japan, Trump’s protectionism raises significant concerns, particularly among automakers. In 2023, they exported 1.5 million vehicles to the U.S., totaling ¥5.8 trillion (€35 billion). A rise in tariffs could have “devastating consequences” on this key sector of the Japanese economy, warns the Japanese daily Sankei Shimbun. Furthermore, Trump is considering setting tariffs on products coming from Mexico at 100%: many Japanese auto manufacturers—such as Toyota, Honda, or Mazda—produce between 70% and 90% of their vehicles in Mexico to export them to the United States.
Beyond China and Japan, analysts believe that the economies of Singapore, Malaysia, and Vietnam could face the most severe impacts from protectionist policies.
Experts interviewed by Channel News Asia also highlight the issue of Chinese products transiting through neighboring countries to circumvent restrictions on “made in China” goods in the U.S. For instance, in 2019, Vietnam found itself at the center of illegal transfers of Chinese goods labeled as “made in Vietnam” to bypass tariffs imposed by Trump’s first administration. By the end of his term in 2021, the U.S. trade deficit with Vietnam stood at €64 billion.
Ultimately, Professor Chong from Singapore concludes, “Asia is in a much less comfortable position than in 2016.”
