On August 7th, US President Trump’s recently updated “reciprocal tariff” rates took effect. Almost all US trading partners now face tariffs ranging from 10% to 50%. Asian partners have been hardest hit, impacting a wide range of industries, from electronics exporters in Thailand and Vietnam to chip manufacturers in Malaysia and garment factories in Cambodia.
Wide Impact
Southeast Asian countries are facing vastly different outcomes. According to a recent BBC report, Vietnam, the first of the 10 ASEAN countries to negotiate and reach an agreement with the US, reduced its tariff rate from 46% to 20%. Although some reports indicate Hanoi disagrees with Trump’s stated figure (20%), Vietnam effectively sets the standard for other countries in the region.
According to the latest tariff list, most other countries in Southeast Asia and South Asia, including Cambodia, Indonesia, Malaysia, the Philippines, Bangladesh, Sri Lanka, Thailand, and Vietnam, now face tariffs ranging from 19% to 20%. Brunei’s rate is slightly higher, at 25%. Singapore’s tariff remains unchanged at 10%.
Myanmar and Laos are among the hardest-hit countries globally, facing the second-highest tariff of 40%. The UK’s Independent reports that this is enough to prevent their exports from entering the US market.
The news sent shockwaves through the entire region, whose countries are heavily reliant on US demand due to their reliance on low-cost textile and agricultural exports. In 2024, total US-ASEAN merchandise trade is estimated to reach $476.8 billion, with the 10 ASEAN countries exporting $352.3 billion worth of goods to the US. Vietnam is by far the most affected economy, with exports to the US totaling $137 billion, representing approximately 30% of its GDP.
An even greater impact comes from the additional transshipment tariffs recently announced by Trump. Trump announced that any country or region that circumvents tariffs by transshipping goods through a third party will be subject to a 40% transshipment tax—the purpose of these tariffs is to cut off re-export trade.
The New York Times stated on the 5th that this policy has a significant impact on Southeast Asia, as Chinese investment has helped its poorer neighbors achieve faster economic growth. A crackdown on re-exports will hit these countries’ economies and further complicate supply chains in Southeast Asia, which relies heavily on Chinese raw materials and components. From Vietnam to Cambodia to Indonesia, officials and business executives are urgently assessing the consequences of the new tariffs.
“If everyone in our region ends up facing tariffs of around 20%, our buyers won’t look for alternative suppliers—it’s just a tax, like VAT, for American consumers,” Richard Han, CEO of Hana Microelectronics in Thailand, told the BBC. He is concerned about transshipment. Under World Trade Organization (WTO) rules, a product is considered locally produced if at least 40% value is added during local manufacturing or if it is “substantially transformed” into a new product (e.g., an iPhone becomes something different after assembly). However, the Trump administration has disregarded WTO rules, and the definition of “transshipment” is currently unclear.
If the US mandates an increase in local content or a reduction in the use of Chinese components, the impact on Thai businesses could far exceed the base tariff rate. “China has by far the largest supply chain in electronics and many other industries, and their products are the cheapest,” said Richard Han. “For Thailand, Vietnam, or Malaysia, achieving a very high localization ratio, such as 50% to 60% domestic manufacturing, is nearly impossible. If that were a requirement for obtaining a designation of origin from the US, no one would get it.”
“ASEAN and its Asian neighbors have multiple options”
Singapore’s Channel News Asia reported that in the short term, governments may comply with Trump’s tariff threats to avoid severe economic damage. If the terms of the agreement unexpectedly change, governments will make concessions and may grit their teeth. However, in this scenario, every tariff will spark resentment and suspicion. These tariffs will also reinforce a disturbing perception: “Any dependence on the US can become a burden.”
Swaran Singh, professor of international relations at Jawaharlal Nehru University in India, believes that Trump’s tariffs have “disrupted the entire global trading system.” Singh noted that most trading nations are exploring alternatives to reduce their dependence on the US.
Irene, an economic researcher for India and Emerging Asia at the Center for Strategic and International Studies, said that ASEAN and its Asian neighbors have multiple options. Tariffs will prompt Asia to turn to other economic partners. Following the US withdrawal from the Trans-Pacific Partnership (TPP), some countries joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). Similar to the CPTPP, member countries can strengthen economic and trade cooperation under the RCEP framework, for example by deepening industrial collaboration and optimizing industrial and supply chain layouts to enhance their competitiveness and resilience in global trade. Furthermore, some ASEAN member states are also maintaining ties with Latin American countries to explore new avenues for trade growth.