James Crabtree on US' latest tariff announcements

Key Concepts:

• Tariffs imposed by the US on various countries.
• Impact of tariffs on Asian economies, particularly Southeast Asia.
• ASEAN centrality and US commitment.
• Bilateral deals vs. trade agreements.
• Transshipment and its implications.
• US-China trade relations and influence.
• Geopolitical implications of US trade policies.
• Trump administration's trade strategy and its potential consequences.

Tariff Announcements and Regional Impact

The United States has announced tariff rates on exports from various countries, leading to a mixed reaction across Asian economies. Some Southeast Asian nations face steep tariffs, with Lao and Myanmar initially facing 40% levies on all exports to the US, a slight reduction from the initially announced rates on April 2nd. These rates are second only to Syria's at 41%.

However, Indonesia, Thailand, Vietnam, Malaysia, the Philippines, and Cambodia saw their rates lowered. Indonesia, Vietnam, and the Philippines reached agreements with the US in July, before the deadline. In East Asia, Taiwan faces a 20% levy, reduced from 32%, while Japan secured 15% but continues to negotiate on automobiles. South Korea also obtained 15% but faces a 50% tariff on copper. China has until August 12th to reach an agreement with Washington.

South Asia and the US-Russia Dynamic

In South Asia, India faces a 25% tariff, with President Trump citing New Delhi's close ties with Russia as a factor. White House officials indicate that issues with New Delhi will not be resolved quickly, and trade negotiators are expected to meet again in late August. Pakistan, on the other hand, secured a reduction in its tariff rate from 29% to 19%.

Expert Analysis: James Crabtree's Perspective

James Crabtree, a distinguished visiting fellow from the European Council on Foreign Relations, provides insights into the tariff situation. He notes that out of 92 countries, 26 have rates above 15%, with nine of those being from Southeast Asia.

Crabtree argues that export-intensive economies in Southeast Asia are particularly vulnerable because they sell a lot of goods to the US but don't buy as much in return. This explains the high rates for Lao and Myanmar, which sell little to the US and buy almost nothing. He suggests that many countries will be reasonably happy with the outcome, partially because they got big reductions, but also because none of them did any better than each other. The domestic political optics matter in the short term. For example, Thailand cares about whether its rate is worse than Vietnam or Malaysia.

Geopolitical Implications and ASEAN Centrality

Crabtree suggests that the US's actions on tariffs may lead governments in Southeast Asia to view China as a more stable and reliable partner. The US is proving itself to be an unreliable partner, and the economic impact of the US has been declining in recent years. The way the Trump administration has targeted these countries will support those who say they should do more business with China because they don't behave like this. While the US remains a powerful country and everyone wants to trade with it, it is not doing itself any favors by behaving this way.

Transshipment and US Trade Policy on China

The US aims to reduce the trade deficit, bring back manufacturing, and isolate China from supply chains. The threat of steeper transshipment rates is intended to prevent countries from selling on imports from China into the United States.

Crabtree notes that the agreements are not legally enforceable trade agreements but rather bilateral deals. The US has reportedly asked countries to cut down on the amount of goods they use from China, not just strategic goods but also everyday items. If countries agree to this, it will upset Beijing. However, countries may half-agree with their fingers crossed, finding ways to circumvent the requirements.

Uncertainty and Potential for Change

President Trump can increase tariffs again if he finds any country in violation of the terms. The situation is not the end of the matter, and countries may try to get better deals. Lobbying efforts will continue to seek exemptions or lower rates. Trump's addiction to using tariffs as leverage means he can raise them on a whim, but he can also lower them if a country does something he approves of. The process is arbitrary and confusing, and this will be a semi-permanent condition of dealing with the US while Trump is in office.

Long-Term Losses for Washington

While Trump may see these tariffs as wins, there are potential long-term losses for Washington. He is treating allies poorly, as seen in the rates for Taiwan, India, and Switzerland. The US may find that its partners and allies will not support or work with it as closely as they used to. In regions like Southeast Asia, where countries balance between the US and China, this could push countries towards China. Beijing recognizes that this creates opportunities for it to move into the space that the US is leaving as the world's economic leader and architect.

Conclusion

The US tariff announcements have created a complex and uncertain situation for Asian economies. While some countries have managed to secure favorable rates, the overall impact is likely to be negative, potentially pushing countries towards China and undermining US influence in the region. The arbitrary nature of Trump's trade policies and the potential for sudden changes create further instability and uncertainty.