Despite deals, US tariffs pose a challenge to export-oriented Asian economies

But analysts at the London-based research firm BMI noted that the impact of the increased tariffs, which will be enforced from August 1, can be mitigated by the results of bilateral deals.

Several members of the Association of Southeast Asian Nations, like Malaysia, Thailand and the Philippines, are negotiating with the US to reduce the tariffs that US President Donald Trump has threatened to impose.

ASEAN countries that are part of BRICS are also facing more pressure from the US. Trump has warned that he would impose an additional 10 per cent tariff on any country aligning with what he called the "anti-American policies" of BRICS.

Darren Tay, BMI's head of Asia country risk, noted how the US tariffs will have a different impact on Thailand and the Philippines.

Tay said Thailand is facing a 36 per cent reciprocal tariff and a potential BRICS tariff. Thailand is a partner country of BRICS.

Tay said another challenge for Thailand is that it "does not seem to have much by way of concessions to offer the United States".

BMI estimates that Thailand's GDP could contract by as much as 0.5 per cent on the back of Thailand's "above average" export exposure to the US. Tay said a domestic political scandal may also drag Thailand's medium-term outlook.

Tay said the Philippines, which is looking at a 20 per cent tariff, may negotiate defence spending to secure a trade deal.

Vietnam, which managed to negotiate a trade deal with the US, is expected to grow strongly despite its big export sector.

The US has reduced tariffs on Vietnam to 20 per cent from the initial 46 per cent after Vietnam agreed to duty-free imports from the US and to purchase US aircraft.

Shiba Sayaka, BMI's senior Asia country risk analyst, sees Vietnam's export sector expanding, supported by competitive labour costs.

Likewise, tariffs imposed on Indonesia were reduced from 32 per cent to 19 per cent after Indonesia agreed to offer concessions, including a $15 billion energy purchase and eliminating duties on US goods.

Carolyn Pang, BMI's Asia country risk analyst, said the potential imposition of a 10 per cent BRICS tariff is a main upside risk for Indonesia. Indonesia is a BRICS member.

Pang said the tariffs' impact will be limited by Indonesia's domestic-focused economy.

But it's not country-based tariffs alone that would impact ASEAN economies.

Singapore, for example, is only subject to the universal 10 per cent tariff. But the city-state is vulnerable to the potential sectoral tariffs that Trump will impose.

Trump has threatened to impose tariffs on pharmaceutical products and semiconductors. This can hurt Singapore's economy as it is a key hub for the pharmaceutical industry.

Lee Yen Nee, BMI's senior Asia country risk analyst, said US tariffs on Singapore could surge above 70 per cent due to high pharmaceutical tariffs.

Lee said Singapore's export exposure to the US is among the lowest in the region, but a deep economic contraction is possible with tariff hikes.

Prime Sarmiento 

China Daily

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