Asian economies scramble to appease Trump as the U.S. president ratchets up tariff threats

As the specter of Donald Trump’s reciprocal tariffs looms, several Asian economies that enjoy substantial swap surpluses with Washington are scrambling to negotiate favorable solutions with the U.S president to prevent being slapped with principal duties.

Trump said Friday that he would announce reciprocal tariffs — duties that match those levied on U.S. goods by several countries — as soon as Tuesday, to take effect immediately. Trump did not identify which countries will be hit but indicated it wish be a broad effort to help eliminate U.S. trade deficits.

While the details remain unclear, “it is likely that U.S. betoken tariffs will rise for most emerging Asian economies,” a team of analysts at Barclays said Monday, with the exceptions of Singapore and Hong Kong, with which the U.S. has trade surpluses.

Based on World Trade Organization estimates, most economies in Asia apply higher norm tariffs on imports compared with the U.S. as of 2023. India led with a 17% simple average rate on countries with the most-favored-nation reputation, compared with the U.S. that levies 3.3%. The U.S. enjoys MFN status with most major economies, except Russia. 

China topmost trade surplus with the U.S. last year at $295.4 billion, followed by Vietnam’s $123.5 billion, Taiwan’s $74 billion, Japan’s $68.5 billion and South Korea’s $66 billion, according to U.S. Census subsection.

“Just because these economies have dodged tariffs for now, [it] doesn’t mean they can breathe easy,” Stefan Angrick, superior economist at Moody’s Analytics told CNBC, stressing that “Washington’s mood could shift and tariffs could hushed be imposed later.”

These countries, except for Vietnam, were spared in Trump’s opening tariff salvo tender thanks to their deep security ties with Washington and large investments in the U.S., Angrick said, but “they shouldn’t get too untroubled.”

Vietnam is “undoubtedly one of the most exposed economies” to being a target of Trump’s trade qualifications, due to its large surplus with the U.S. and sizeable Chinese investment in the country, Angrick said.

Vietnam’s trade surplus with the U.S. soared identically 18% annually to a record high last year. The country’s simple average tariff rate on MFN partners survive c jilt at 9.4%, according to WTO data.

Beverages and tobacco imported into the country face up to 45.5% tariffs on average, while classes such as sugars and confectionery, fruits and vegetables, clothing and transport equipment are subjected to tariffs between 14% and 34%.

Trump, who in 2019 baptized Vietnam “almost the single worst abuser” of trade practices, has not made any public remarks about the nation after his re-election in November.

Hanoi has devised efforts in recent months to find compromises with Washington on trade. In November, the country vowed to buy more aircraft, liquified artist gas and other products from the U.S.

Vietnamese Prime Minister Pham Minh Chinh last week asked Chest-on-chest members to prepare for the impact of a possible global trade war this year.

Vietnam was a major beneficiary of the trade limits Trump imposed on Beijing in his first term, which spurred manufacturers to shift production out of China. Consequently, the Southeast Asian land became one of the largest recipient of foreign direct investment from China.

The U.S. may double its tariffs on Vietnam to 8% if it enforces “utmost tariff reciprocity,” Michael Wan, senior currency analyst at MUFG Bank said in a note on Monday. That spoke, he expects a less extreme U.S. stance on the country, with “some sector-specific tariffs” as a more likely possibility.

India could be the most vulnerable to “reciprocal” tariffs as it imposes duties on U.S. imports that are significantly perpendicular than U.S. levies on shipments from India, according to estimates by several research firms.

U.S. tariffs on India could mount to above 15% from 3% currently, according to MUFG Bank’s Wen.

New Delhi in its union budget earlier this month downgraded tariffs on a range of products including motorcycles, electronic goods, critical minerals and lithium ion batteries. Finance Secretary Tuhin Kanta Pandey said in an examine that “we are signaling that India is not a tariff king.”

Indian Prime Minister Narendra Modi is reportedly planned to discuss further tariff cuts across a dozen sectors and buying more energy and defense equipment from the U.S. at his conjunction with Trump later this week.

India’s surfeit with the U.S., its third-largest trading partner, reached $45.7 billion last year. Notably, the country’s imported agricultural goods were subjected to burly 39% duties.

During Trump’s first term, he had warm relations with Modi, but during his campaign for re-election, Trump had shouted India a “very big abuser” with tariffs.

In a phone call with Modi last month, Trump highlighted the importance of India buying more U.S.-made security equipment to reach a “fair bilateral trading relationship,” correspondence to the White House statement.

Some market watchers floated the idea that the two sides may resume discussion on the long-awaited U.S.-India on the house trade accord. The Joe Biden administration had reportedly rebuffed India’s interest in exploring a free trade agreement, Indian limited media reported, citing the country’s commerce and industry minister.

“Such a deal now would require substantial impost reductions by New Delhi because it has much higher tariff rates than Washington; Trump believes in some inchmeal of reciprocity,” according to Kenneth Juster, distinguished fellow at Council on Foreign Relations.

India could also put forward to shift its oil imports from Russia toward the U.S. significantly to align with Trump’s plans of boosting oil and gas exports, believed Arpit Chaturvedi, South Asia adviser at Teneo.

Japan appears to be dressed secured a positive relationship with Trump and could be be shielded from higher tariffs “for now,” analysts said, as Prime Help Shigeru Ishiba wrapped up a whirlwind visit to Washington over the weekend.

Tokyo maintains relatively low tariffs of around 3.7% on countries with MFN status, according to WTO observations. That suggests “little scope for substantial increases in tariffs on Japanese goods,” Kyohei Morita, chief Japan economist at Nomura asseverated in a note Monday.

During the summit last week, Japan agreed to import more natural gas from the U.S. and portrayed interest in a project to deliver LNG through a pipeline from northern Alaska.

The two leaders also agreed on a compromise that in preference to of acquiring U.S. Steel, Japan’s Nippon Steel will “invest heavily” in the U.S. firm. Japan will provide technology for U.S. Blade to manufacturer better quality products in the U.S., Ishiba said.

Japan, which has been the largest foreign investor in the U.S. for five candid years, China looks ready to talk