The Latest on Southeast Asia: Regional Tariff Turmoil Continues

Malaysian trade minister Johari Abdul Ghani declared on March 15 that his country’s Agreement on Reciprocal Trade with the United States has been rendered “null and void” following the U.S. Supreme Court’s February 20 decision striking down the Trump administration’s worldwide tariffs under the International Emergency Economic Powers Act. This has provoked consternation, with Kuala Lumpur walking it back the next day and then reconfirming Johari’s statement on March 17. If the decision stands, Malaysia will be the first country to walk away from a trade deal with the Trump administration.

This follows the Office of the U.S. Trade Representative’s (USTR) launch of Section 301(b) investigations against dozens of countries in the hopes of reimposing tariffs following the IEEPA decision. On March 11, USTR Jamieson Greer announced investigations relating to structural excess capacity in 16 countries, including six in Southeast Asia: Cambodia, Indonesia, Malaysia, Singapore, Thailand, and Vietnam. Greer alleged that these countries are overproducing beyond domestic demand in critical sectors like auto manufacturing, electronics, metals, and rubber, displacing existing U.S. production. A day later, USTR announced investigations of 60 countries to determine whether they have failed to impose and enforce a ban on goods produced with forced labor. These include the six Southeast Asian countries targeted in the first investigation plus the Philippines.

The White House has promised to use backup plans to reimpose as many of the tariffs struck down by the Supreme Court as possible, starting with the immediate issuance of a 150-day global tariff of 15 percent. The Section 301 investigations now further complicate the trade deals the United States has already concluded in the region (with Cambodia, Indonesia, and Malaysia) or has been negotiating for months (with the Philippines, Thailand, and Vietnam). The picture is also clouded by the fact that nearly every country in the region saw exports to the United States and globally increase last year despite the tariffs. That takes some pressure off of governments to make any major concessions to Washington. But it also risks making countries with surging trade surpluses with the United States, like Thailand and especially Vietnam, even larger targets for the administration.

The regional government left most confused by the recent shifts in tariff policy is probably Singapore. The city-state has a trade deficit with the United States and so saw its exports hit only by the administration’s global baseline tariff of 10 percent last year. When that baseline was temporarily raised to 15 percent last month, it produced some annoyance in the city-state but little more. The Section 301 investigation on excess capacity, however, change things. USTR is now threatening Singapore with higher tariffs, claiming the city-state ran a $27 billion trade surplus in goods and services with the United States in 2024. But Singapore quickly pointed out that the agency got the amount right but the direction wrong: Singapore ran a $27 billion trade deficit with the United States in 2024.

Japhet Quitzon is an Associate Fellow for the Southeast Asia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Gregory B. Poling is a senior fellow and director for the Southeast Asia Program and the Asia Maritime Transparency Initiative at CSIS. 

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