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Trump Tariffs Likely Pushing Asia Elsewhere for Economic Partners
Photo: NHAC NGUYEN/AFP via Getty Images
Economic security goes hand in hand with national security and diplomatic security, and the barrage of U.S. tariffs, in the form of executive action and Section 301 and 232 cases, will do much to undermine the long-term strength and stability of the U.S. market. Secretary of State Marco Rubio, who dons many a national and foreign policy hat, recently wrapped up a trip to Malaysia, where he attended the ASEAN Regional Forum and East Asia Summit foreign ministers’ meeting, just as President Trump was sending letters to several countries regarding their new tariff rates. Since Liberation Day, the Trump administration’s actions have thrown many U.S. friends and treaty allies into a state of confusion and frustration, and these allies will almost certainly begin to foster relationships elsewhere.
The Mirage of Leverage
The leverage the United States has only goes so far with Asian countries, particularly ASEAN, the Association of Southeast Asian Nations. ASEAN is often aspirational, with its former dreams of an economic community along the lines of the European Union left mostly unrealized. But with several of its members tariffed at 30 percent or higher—despite welcoming increased U.S. investment and purchase of U.S. goods, including military equipment, with little to show in return except continued access to the U.S. market at much higher prices—recent developments have likely left many Southeast Asia leaders unclear on what would close a deal and, overall, discontented with the process. At the same forum Rubio attended, for instance, Malaysian leader Anwar Ibrahim lamented, “Across the world, tools once used to generate growth are now wielded to pressure, isolate and contain. As we navigate external pressures, we need to fortify our foundations. Trade among ourselves. Invest more in one another.”
Trade Partners
As of now, the United States remains one of the top trading partners for the region, particularly ASEAN. U.S. goods trade with ASEAN totaled an estimated $476.8 billion in 2024, with U.S. exports to ASEAN at $124.6 billion, up 16.6 percent ($17.8 billion) from 2023. U.S. imports from ASEAN totaled $352.3 billion, up 13.3 percent ($41.4 billion) from 2023. The United States is also a major source of foreign direct investment (FDI), with more than 6,000 U.S. companies in the region. This investment and trade further support 625,000 jobs in the United States.
However, trade flows between China and ASEAN have also grown in the last 15 years, with each becoming the other’s largest trading partner. ASEAN made up 15 percent of China’s total trade in 2023, up from 10 percent in 2010, while China made up 20 percent of ASEAN’s total trade in 2023, up from 12 percent in 2010. Trade ties with Japan have also grown, with two-way trade between ASEAN and Japan standing at $241.1 billion—6.8 percent of ASEAN’s total merchandise trade—in 2023. Japan is ASEAN’s fourth-largest trade partner.
The Republic of Korea (ROK) has also stepped up its engagement in the region, with two-way trade between ASEAN and the ROK reaching $208.11 billion in 2024, an increase of 5.7 percent from 2023. The ROK is ASEAN’s fifth-largest trading partner.
The region is dominated by inter-Asian trade, with India becoming a more important partner, suggesting these trends will continue should U.S. tariffs and export controls become too burdensome.
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Erin L. Murphy
Former Deputy Director, Chair on India and Emerging Asia Economics and Senior Fellow, Emerging Asia Economics
Remote Visualization
Asian Trade Agreements
ASEAN has options. Several countries joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an effort led by Japan, following the U.S. withdrawal from the Trans-Pacific Partnership. The CPTPP continues to grow its membership, has shown maturity and fairness in trade disputes (something the World Trade Organization currently lacks), enforces labor laws and standards around workers’ rights, requires free cross-border data flows, and has lowered trade barriers among members.
All of ASEAN is included in the Regional Comprehensive Economic Partnership (RCEP), which also includes Australia, China, Japan, New Zealand, and South Korea. Like the CPTPP, the RCEP lowers trade barriers and sets rules among the participants, but has generally less extensive commitments and omits issues covered in the CPTPP such as labor, the environment, and state-owned enterprises.
Several members of ASEAN also have ties to countries in Latin America and can explore new and existing avenues to increase trade. This can be done through their ASEAN membership and engagement through the Asia-Pacific Economic Cooperation forum, as well as through the Latin American countries that are also members of the CPTPP. In other words, ASEAN and its Asian neighbors have options.
Stacked Tariffs Up the Burden
Currently, there are seven active Section 232 investigations. These investigations involve copper, timber and lumber, semiconductors and semiconductor manufacturing equipment, pharmaceuticals and pharmaceutical ingredients, trucks, processed critical minerals and derivative products, and commercial aircraft and jet engines. Though China will bear the brunt of any potential 232 tariffs, treaty allies and partners will certainly get caught up in the punitive melee. Long-time treaty allies Japan and South Korea will get swept up in a number of 232 issues, including on semiconductors and trucks. Taiwan, a major investor in the U.S. semiconductor industry, would be impacted as well. Indonesia, which seeks to expand its market share on copper and critical minerals that support electric vehicles and batteries, may have to turn to regional neighbors instead of seeking increased access to the U.S. markets. Finally, Singapore and India each contribute to pharmaceutical products exported to the United States; India leads the way, supplying 32 percent of the active pharmaceutical ingredients used in U.S. drugs.
Given President Trump’s executive orders and public speeches calling for U.S. leadership in semiconductors and energy, as well as his administration’s focus on national security, these potential tariffs on related products from U.S. partners and allies will shift the majority of pain to U.S. consumers, not to Asia. There will certainly be short-term economic pain in the region, but increasing inter-ASEAN trade and engagement with Northeast Asia, India, and Latin America shows that the region has opportunities to grow.
China Plus One Strategy Now Risky
Multinational and U.S. companies with operations based in China initially moved their supply chains to other countries beginning in the mid-2000s in an effort to bring down labor and production costs, known as the “China Plus One” strategy. Beginning in the first Trump administration and continuing through the Biden administration, this strategy morphed into an effort to diversify manufacturing supply chains and protect from shocks that were made apparent during the Covid-19 pandemic and from export controls, sanctions, and other punitive economic measures targeting China.
India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam all benefitted from the China Plus One strategy as they had manufacturing bases, the ability to scale, and cheap and skilled labor forces. Malaysia, Thailand, and the Philippines have all made strides in inserting themselves into the semiconductor supply chain through chip testing and packaging; Indonesia has succeeded in a mines-to-manufacturing electric vehicle supply chain; and Vietnam has reshaped its export market through consumer electronics production.
However, multinational, Asian, and U.S. companies that implemented this strategy are now faced with double-digit tariffs and Section 232 investigations. Moving manufacturing supply chains is not a simple task, and many of them cannot be reshored to the United States as there are not adequate facilities and labor, and consumers are unlikely to pay the price of these products, resulting in a short-term lose-lose situation, but ultimately a situation where companies pursue a U.S. Plus One strategy.
The United States Isolated
It is clear that the loss of manufacturing to Asia that began in the 1990s still fuels the ire that drives the Trump administration’s tariff policy and its supporters today. It is also true that the U.S. market has been relatively open to global investors and exporters while most countries have put up and kept in place significant trade and non-tariff barriers. However, the world of today is much different than that of the 1990s, and to maintain the economic and national security that the United States seeks, it does not make sense to punish allies and enemies alike. Asian countries probably will not cut off the United States completely, perhaps hoping for a time when the market of over 300 million people will once again be open to products that the United States cannot efficiently make at home or does not wish to make at home. Until then, the continued inconsistency and lack of clarity around U.S. economic policy will drive Asian partners to look within or elsewhere, leave the United States alone.
Erin Murphy is the deputy director for the Chair on India and Emerging Asia Economics and senior fellow of Emerging Asia Economics at the Center for Strategic and International Studies (CSIS).