Asian Economy Scramble to appease Trump as the US President ratchets tariff threat

As Donald Trump’s mutual tariff ghosts loom, some Asian economies enjoy substantial trade surplus with Washington negotiate a positive solution with the US president to prevent slaps at higher obligations I’m in a hurry to do it.

Trump said Friday that each country will announce obligations consistent with the obligations imposed on U.S. goods, in order to come into effect immediately on Tuesday. Trump did not specify which countries will be hit, but showed that it is a broad effort that will help eliminate the US trade deficit.

Details remain unknown, but “US import duties are likely to increase in most emerging Asian economies,” a team of Barclays analysts said on Monday, with the exception of Singapore and Hong Kong.

Based on World Trade Organization estimates, most economies in Asia applied higher average tariffs on imports compared to the US in 2023. Collection: 3.3%. The US enjoys MFN status in most major economies except Russia.

According to the US Census Bureau, China last year’s trade surplus with the US was $295.5 billion, with trade surplus of $29.55 billion, with Vietnam’s $123.5 billion, Taiwan’s $74 billion, Japan’s $68.5 billion, and South Korea’s 66 billion I’ve broken through the dollar.

“Just because these economies are avoiding tariffs for now, doesn’t mean they can breathe easily,” Stephen Anglick, a senior economist at Moody’s Analytics, told CNBC, “Washington.” The mood of the person may change and tariffs may be imposed later.

These countries except Vietnam have spared Trump’s opening tariffs salvo thanks to deep security with Washington and massive investment in the US, Anglick said, but “they should be too comfortable.” Not that,” he said.

Vietnam is “arguably one of the most exposed economies” to be a target of Trump’s trade restrictions due to a massive surplus with the US and substantial Chinese investment in the country, Anglick said Ta.

Vietnam’s trade surplus with the US rose nearly 18% a year last year. According to WTO data, the simple average tariff rate for the country of MFN partners was 9.4%.

Beverages and tobacco imported into the country face tariffs of up to 45.5% on average, but categories such as sugar and sweets, fruits and vegetables, clothing and transportation equipment are exposed to tariffs of 14% to 34%. Masu.

Called Vietnam in 2019, Trump was called the almost single worst abuser of trade practices, but has not made any public comments about the country since re-election in November.

Hanoi has worked to find a compromise with Washington in trade in recent months. In November, the country vowed to buy more aircraft, liquefied natural gas and other US products.

Vietnam’s prime minister, Prime Minister Pham Minh Chin, last week asked cabinet members to prepare for the impact of this year’s potential global trade war.

Vietnam was the major beneficiary of the trade barriers Trump imposed on Beijing in his first term, which spurred manufacturers to shift production from China. As a result, Southeast Asian countries have become one of the biggest recipients of foreign direct investment from China.

Michael Wang, a senior currency analyst at MUFG Bank, said in a memo on Monday that the US could double Vietnam’s tariffs to 8% if it implements “full tariff reciprocity.” I stated. That said, he expects the US extreme stance on the country, with the likely “customs inherent in some sectors.”

According to estimates by several researchers, India is most vulnerable to tariffs that are most vulnerable to “mutual” tariffs, as it imposes obligations on US imports that are significantly more steep than those shipped from the US. It may be.

According to MUFG Bank’s WEN, US tariffs on India could be above 15% from the current 3%.

New Delhi reduced tariffs on various products, including motorcycles, electronic goods, important minerals and lithium-ion batteries, in its union budget earlier this month. Treasury Secretary Tuhin Kanta Pandey said in an interview that “we are informing India that it is not the customs king.”

India’s Prime Minister Narendra Modi is reportedly ready to discuss further tariff cuts across dozens of sectors in a meeting with Trump later this week.

India’s surplus with the second largest trading partner, the United States, reached $45.7 billion last year. In particular, the country’s imported agricultural products were exposed to a large 39% job.

During Trump’s first term he had a warm relationship with Modi, but during his campaign for reelection, Trump called India a “very big abuser” of tariffs.

In a call with Modi last month, Trump highlighted the importance of India buying more US-made security equipment and reaching a “fair bilateral trade relationship,” according to a White House statement. .

Some market watchers have raised the idea that both sides could resume debate over the much-anticipated US-India free trade agreement. The Joe Biden administration reportedly rejected India’s interest in exploring a free trade deal, local Indian media reported, citing the country’s commerce and industry minister.

“Trades like this would require significant tariff cuts by New Delhi, as they have far higher tariff rates than Washington. Trump believes in some degree of mutuality,” said the Foreign Relations Council. According to Kenneth Zister, a well-known fellow of the association.

India also said it could offer to shift oil imports from Russia to the US, consistent with Trump’s plans to boost oil and gas exports.

Japan appears to have secured positive ties with Trump and could be protected from higher tariffs “for now,” analysts said.

According to WTO data, Tokyo has relatively low tariffs of around 3.7% in a country with MFN status. “There is little scope for a significant increase in tariffs on Japanese goods,” Nomura’s President of Japanese Economics Kyoto Morita Kyoto Morita said in a memo on Monday.

At last week’s summit, Japan agreed to import more natural gas from the US and expressed interest in a project to provide LNG through a pipeline from northern Alaska.

The two leaders also agreed to a compromise in exchange for Japanese Nippon Steel, which instead of “a heavily invested” in a US company, to acquire US steel. Japan will provide technology to US steel to manufacture better quality products in the US, Isba said.

Japan, the largest foreign investor in the United States for the fifth consecutive year, has pledged to expand its investment from $783 billion in 2023 to $1 trillion.

“While Japan does not avoid all the impacts of future US tariff policies, Tokyo may avoid targeted treatments found in countries such as Canada, Mexico and China,” says James, vice president of Teno. – Brady said in a note on Saturday.

“We may even expect more generous trade treatment than other major economies, as it appears to enjoy one of Trump’s most preferred countries,” Brady said.

It is believed to be modest and restrained, including 15% collection of coal in Beijing, liquefaction of natural gas, crude oil, agricultural equipment, cars and pickup trucks.

Data compiled by Nomura estimates that the tariff package will cover $13.9 billion worth of imports from the US from China in 2024.

That’s significantly lower than the $50 billion worth of US goods covered during Trump’s first term, said Tommy Xie, OCBC Bank’s Head of Asian Macro Research.

The “calibrated approach” shows that “China is choosing a more diverse response,” and while investing non-tariff measures such as export controls and regulatory investigations in US companies, we also show that “further negotiations” It leaves room for that,” Xie added.