The U.S. government threatens to impose high new tariffs on Southeast Asian countries, significantly impacting global supply chains and consumer prices in the United States.
Tariffs ranging from 25% to 40% imposed on goods from this region disrupt supply chains, increasing costs for businesses and U.S. consumers amid tense trade negotiations.
MAIN CONTENT
The United States is preparing to impose new tariffs ranging from 25% to 40% on several Southeast Asian countries to prevent the diversion of Chinese goods.
Increased tariffs create a 'tariff wall' that disrupts supply chains, leading to higher production costs and prices for goods in the United States.
The risk of inflation and difficulties for U.S. businesses due to significantly increased prices of raw materials and imported products.
What is the purpose of the new tariffs imposed by the United States on Southeast Asia?
Top trade experts emphasize that the U.S. is imposing tariffs to prevent the diversion of exports from China to Southeast Asia to avoid old tariffs.
According to President Donald Trump, the new tariffs ranging from 25% to 40% targeted at countries like Cambodia, Indonesia, Laos, Malaysia, and Thailand are expected to raise over $300 billion by the end of 2023. Vietnam, being a major transshipment hub, is facing a 20% tariff and up to 40% on goods transshipped to the United States. This is an action aimed at blocking the exploitation of supply chains to evade tariffs from China.
"This tariff plan will create a 'tariff wall' in Southeast Asia, significantly affecting global supply chains and increasing prices for U.S. consumers."
Alicia García Herrero, Chief Economist for Asia-Pacific, Natixis, 2023
How will tariffs change global supply chains?
Economists warn that the formation of a 'tariff wall' could disrupt regional supply chains, leading to significant increases in production costs and final prices of goods.
Alicia García Herrero noted that countries like Malaysia, Cambodia, and Thailand still have opportunities to negotiate more favorable terms before talks with Washington. However, the tariff imposed on Vietnam should not be used as a template for the whole region due to differences in the rate of importing Chinese raw materials.
Mark Williams, Chief Economist for Asia at Capital Economics, points out that the inconsistent tariffs across countries and industries make enforcement difficult, creating uncertainty in global trade. He also warns that tariffs imposed on Southeast Asian countries may reduce the incentives for businesses to shift production away from China, slowing the diversification of supply chains.
How are U.S. consumers affected by the new tariffs?
Economist Mark Williams argues that although high tariffs are imposed, bringing production back to the U.S. is not feasible due to U.S. industries lacking competitive advantages in costs and scale compared to Asia.
He emphasized that U.S. businesses and consumers face the choice of bearing higher costs or facing product shortages due to increased import prices. The risk of inflation rising is very high as import tariffs are viewed as direct taxes that increase the final prices of goods.
Moreover, stricter controls on goods transiting through third countries will promote the development of a new industry focused on compliance and handling goods at U.S. ports.
"U.S. businesses will not be able to easily replace Asian supply sources. Import tariffs only escalate costs without necessarily benefiting domestic production."
Mark Williams, Chief Economist for Asia, Capital Economics, mid-2023
How can Southeast Asian countries respond to the pressure of new tariffs?
Experts suggest that Southeast Asia needs to strengthen negotiations to avoid uniform tariffs like Vietnam. Diversifying raw material sources and reducing dependence on China is a crucial strategy.
Proactively seeking bilateral and multilateral trade agreements will also help these countries mitigate risks from U.S. tax policies. In addition, improving compliance at ports and enhancing logistics capacity will help minimize the negative impacts of new regulations.
Real-world examples of the impact of tariffs on supply chains
Country Proposed new tariff rate Main impact Response strategy Vietnam 20% – 40% Increased costs for exports, risk of losing trade benefits Increase direct exports, diversify raw material sources Malaysia 25% – 40% Disruption of supply chains, increased production costs Renegotiate tariffs, enhance customs capacity Thailand 25% – 40% Increased raw material costs, impact on production Boost intra-ASEAN trade, improve compliance
Frequently asked questions
How will the imposition of new tariffs affect commodity prices in the United States? Tariffs of 25-40% will drive up import costs, causing retail prices in the United States to rise and putting inflationary pressure on the economy. How is Vietnam affected by U.S. tax policies? Vietnam faces a 20% tariff on exports and 40% on transshipment goods, increasing export costs and creating difficulties for businesses. Will tax policies help the U.S. bring production back domestically? No, many U.S. industries lack competitive advantages to replace production sources in Asia despite high tariffs. Is there potential for negotiations to reduce tariffs with the U.S.? Countries like Malaysia and Cambodia still have room to negotiate for more favorable tax conditions to avoid long-term negative impacts. What should Southeast Asian businesses prepare to cope? They need to diversify raw material sources, optimize supply chains, and enhance customs compliance to mitigate the impact of tariffs.
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