Introduction to New Tariffs
US President Donald Trump announced new tariffs in 14 countries on Monday evening, most of them in Asia. He said the tariffs would start on August 1st, but left the door open for further negotiations and said that the proposed tariffs were "more or less" final offers. "If [countries] call with another offer, and if I like it, we’ll do it," he said.
Countries Targeted by Trump
The countries targeted by Trump included Japan, South Korea, Cambodia, Indonesia, Thailand, Malaysia, Laos, and Myanmar. Analysts say that the focus on Asian countries is part of a step by the Trump government to indirectly address China, with which the US has an ongoing trade and strategic rivalry. China is by far the largest trading partner of Japan, South Korea, Malaysia, Myanmar, and Indonesia, and the largest source of import for Cambodia and Thailand. Trump’s step is probably aimed at putting these countries under pressure to strike a deal with the US as soon as possible.
Potential Backfire
Some observers have suggested that plans to take the trade relationships of these countries with China to the shops could backfire. "The negotiations could prove to be problematic if the United States, as some reports point out, try to make other parts of Asia exclude China from regional supply chains," wrote Gareth Leather, an economist. Since Trump’s so-called tariffs on April 2, the White House has only made collective agreements with three countries: Great Britain, Vietnam, and China.
What is Transhipping?
Transhipping is the delivery of goods to an intermediate destination and then to another final destination. It is often a normal part of global trade, but it can also be a method used to disguise the place of origin of a product. At the beginning of this week, a report was published that proposed Chinese companies were sending more goods to the US over Southeast Asian countries, a form of transhipping that aims to avoid new US tariffs for Chinese goods.
Vietnam as an Example
The deal with Vietnam indicates the US claim in China. The US agreed to reduce tariffs to Vietnam to 20%, but contains a determination for a tariff of 40% to so-called transhipping of goods, with China selling goods such as Vietnam to third countries. Vietnam is just one of three countries with which the US has so far completed a deal. However, Gareth Leather is doubtful and points to the fact that these countries may be concerned about damaging their relationships with China.
Is it Just About China?
In letters to the leaders of the countries targeted with the tariffs of August 1, Trump described their trade surpluses with the US as "a great threat to our economy and in fact". In view of the fact that the Trump government has already reached a commercial truce with China, the continuing tensions with other Asian countries are not just about Beijing. While rivalry with China remains a central focus for the US, this is not the only reason. In the past few weeks, Trump has focused on Japan, describing it as "spoiled" and criticizing it for not buying US products, especially agricultural goods.
Unpredictability of Trump
While most countries would be willing to make concessions to avoid returning to criminal tariffs, "for example by reviving Chinese," other experts are more skeptical. Bill Reinsch, a senior economics adviser, doubts that certain Asian countries will go far enough to calm Trump, given his unpredictability. He said that the feeling is likely to be that "now, if we agree with something, will you come back to something else with sectoral tariffs two weeks later?" If the US is not trustworthy in order not to move the goal posts, "it is very difficult to see that people are willing to enter into obligations."
