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Donald Trump’s trade war farce continued this week with the dispatching of a series of bizarre template letters to the leaders of key trading partners announcing new tariff rates to take effect on 1 August 2025. Trump has lost patience with the all-too-predictable failure of the efforts to use the threat of ‘reciprocal’ tariffs announced on 2 April as leverage to negotiate bilateral deals with almost every country on earth before the 9 July deadline set by the White House.
In some cases Trump appears to have been more aggressive than his own negotiating team, with the 20 per cent tariff rate applied in Vietnam reported to be almost double the rate that Hanoi’s negotiators thought they had a tentative deal on. Brazil, which has a trade deficit with the United States, has been told its tariff rate will shoot up from the 2 April baseline of 10 per cent to 50 per cent in retaliation for the Lula administration’s prosecution of former president Jair Bolsonaro for his attempted coup. Reportedly angered by the BRICS summit’s criticisms of US policy, he announced as well that ‘[a]ny Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff’ as punishment.
Trade coercion as an instrument to force smaller countries to subvert democratic processes and alter their foreign policies to suit the whims of an increasingly authoritarian great power? Who does that sound like? Australian readers shouldn’t hold their breath for histrionic warnings from Canberra’s national security hawks about the global threat to democracy and sovereignty posed by Washington; to them, coercion and interference are only problems when China and Russia do it.
Indeed, as for Trump’s threat of punitive tariffs to hobble the BRICS group, its members hardly need US help in keeping that body from punching below its weight. The summit President Lula has just hosted in Rio de Janeiro illustrated that the more its membership has expanded, the less potential BRICS seems to have to become more than a platform for ‘cost-free grandstanding’ against the West.
A more substantive _expression_ of middle-power, and especially Global South, agency was on show in Malaysia last week, as Malaysia continued its ASEAN chair year with the hosting of the ASEAN Foreign Minister’s Meeting, the East Asia Summit Foreign Ministers’ Meeting and the ASEAN Regional Forum.
Tariffs and economic uncertainties were high on the agenda. In his welcome remarks, Prime Minister Anwar Ibrahim — staring down the barrel of a 25 per cent tariff beginning 1 August, as per Trump’s letter to him — emphasised the urgency of a coordinated approach, decrying the fact that ‘tools once used to generate growth are now wielded to pressure, isolate and contain’. Australia’s Foreign Minister Penny Wong struck the same tone, telling the ABC from Kuala Lumpur that ‘tariffs are [an] unwarranted and unjustified … act of economic self-harm’, while Singaporean Foreign Minister Vivian Balakrishnan emphasised the need for ASEAN to accelerate its own integration efforts to mitigate the impact of US policies.
US Secretary of State Marco Rubio meanwhile found time in between gutting his own department to drop into Kuala Lumpur, where he reportedly received a polite earful from Southeast Asian partners about the impact of tariffs and related economic chaos was having on the region’s economic security.
Rubio is a rare figure in the Trump administration in being intelligent enough to realise that US trade warfare seriously undermines the goodwill and influence the United States has enjoyed in Asia. In his remarks to the press he acknowledged ASEAN countries’ concern about creating jobs for its expanding pool of workers. But he was also duty-bound to defend a US trade policy expressly designed to punish Southeast Asian economies for creating jobs in industries that export to the United States.
Rubio’s reassurances that ‘when all is said and done, many of the countries in Southeast Asia are going to have tariff rates that are actually better than countries in other parts of the world’ also rang a little hollow. If the tariff rates flagged in Trump’s latest round of letters stick beyond 1 August, key Southeast Asian economies will suffer tariff rates not much different from those that caused such shock on 2 April. That would be a serious economic blow to the region.
As Shiro Armstrong writes in this week’s lead article, ‘[n]ew modelling by the East Asian Bureau of Economic Research at the ANU and the Centre for Strategic and International Studies in Jakarta show that Liberation Day tariffs would reduce Southeast Asian GDP by 2.3 per cent and shrink employment by 5.9 per cent.’
Succumbing to the temptation to hit back at the United States with retaliatory tariffs, or erect knee-jerk trade barriers against third countries in reaction to US moves, would hurt the region much more. Tariff contagion would reduce ASEAN GDP by more than 11 per cent and cut employment by 25 per cent, causing economic and political disaster
The same ANU–CSIS study, Armstrong highlights, shows that if RCEP members — ASEAN, along with Australia, Japan, China, South Korea and New Zealand — ‘implement the commitments they made in RCEP and avoid raising tariffs on each other and the rest of the world even as their exports are cut out of US markets, ASEAN economies would grow 1.9 per cent and employment by 2.1 per cent.’
The clear takeaway is that ‘ASEAN and its East Asian partners have a vital interest in holding the line on protectionist contagion through defence of, and doubling down on, the multilateral trading system.’ Nothing can replace the loss of US demand in the short run, but taking the opportunities for new growth generated from deeper regional economic integration and keeping the rest of the world open is the priority going forward.
It was welcome, then, that ASEAN held steady on RCEP in the discussions in Kuala Lumpur last week. But there is scope for going beyond the pro-forma acknowledgements of its importance towards action. Jusuf Wanandi has argued the importance of convening an RCEP Leaders’ Summit in 2025. This would be an important first step towards cementing such a forum as the go-to platform for reinforcing the political consensus in favour of continued integration in the region that was on display in ASEAN’s discussions last week.