[Salon] Fwd: Nikkei: "No time for complacency: 'Asia for Asia' will take time." (10/3/25.)




10/3/25

No time for complacency: 'Asia for Asia' will take time

Governments, companies and investors should anticipate and strategize responses proactively

Thailand factory workers

Steven Okun is CEO of APAC Advisors, a geostrategic consultancy headquartered in Singapore who served in the Clinton administration. Stephen Olson is a Visiting Senior Fellow at ISEAS-Yusof Ishak Institute and a non-resident fellow and visiting lecturer at the Yeutter Institute of International Trade who served as a U.S. trade negotiator. APAC Advisors associate Noemie Viterale contributed to this commentary.

MAGA may end up standing for "Make Asia Great Again."

But not anytime soon.

The chaos ushered in by the America First reciprocal tariff regime -- and the ensuing frenetic rush to conclude deals against the backdrop of constantly shifting deadlines -- settles down.

Now, countries search for alternate markets, given the clarity that the newly imposed U.S. tariffs and President Donald Trump's willingness to use the U.S.'s economic might to drive deals are likely to remain in place for the foreseeable future.

A degree of optimism creeps into the region with the belief that new trading partners can be found to make up the difference.

That may turn out to happen, but not anytime soon. For now, premature optimism displaces a clinical and realistic analysis of global markets. The ripple effects from the Trump administration's demolition of the rules-based global trade system have only begun. Significantly greater trade disruptions and market turmoil are forecast.

We know the first-order effects of Trump's tariffs on China. They will diminish certain exports from there to the U.S. With the country's post-pandemic economic recovery still lagging, coupled with a failing real estate market, efforts to bolster the manufacturing sector through subsidization and other preferences will continue. In the past, the excess industrial capacity found its way into the U.S. market, which resulted in the hollowing out of the U.S. manufacturing base and the jobs that go with it.

Now, China will look to sell its products elsewhere.

Already, we see this excess capacity being dumped into Southeast Asia at prices that threaten the viability of domestic manufacturers. In Thailand, more than 4,000 factories have shut down in the past two years across electronics, furniture, garments and autos, with cheap Chinese imports widely blamed. Indonesia's textile sector likewise shed tens of thousands of jobs under the same pressure. Countries look to protect themselves. Vietnam recently imposed anti-dumping duties of up to 27% on Chinese hot-rolled steel, citing injury to local firms. Indonesia recently announced four-year anti-dumping duties on nylon film from China, and Thailand expanded its 30% anti-dumping duty on alloyed hot-rolled coil from China to close loopholes used to evade earlier measures. Expect more such measures to come.

One should not count on Chinese passivity in forecasting trade and investment. Countermeasures will follow.

altA steel plant in Shanghai: Vietnam has imposed anti-dumping duties on Chinese hot-rolled steel.   © Reuters 

Vietnam -- once the safe "plus one" to China -- could see a reversal in its investment fortunes if a U.S.-China agreement lowers the existing U.S. tariffs on China to an amount closer to the level of that on Vietnam. Trump has sent signals he wants a deal, including scrapping the Taiwanese president's planned U.S. transit, blocking more than $400 million in military aid to Taiwan and pausing some export controls on sensitive technology to China -- although there has been a fair amount of zigzagging on tech controls. The "plus one" edge Vietnam once counted on could disappear if a U.S.-China deal undercuts Vietnam's tariff advantage. In its place: "Vietnam minus one," with factories and flows returning to China. The rerouting of supply chains is just beginning.

Government officials, business leaders and investors increasingly focus on "Asia for Asia." Instead of looking to the U.S. export market, businesses look to source, manufacture and service within Asia itself. This makes sense. For both companies and investors, this reduces dependence on the U.S. policy swings and builds resilience closer to home. However, the U.S. market remains indispensable for many of its trading partners. Led by Vietnam's record-breaking $123 billion trade surplus with the U.S. in 2024, the region as a whole enjoys a $227 billion trade surplus. Eventually, trade flows will reorient away from the U.S., but that will take years.

One further catch: If everyone pursues "Asia for Asia," supply will surge in modest and developing markets. Competition will intensify and margins will shrink. Customers tied to the U.S.-exposed companies will pull back on consumption spending, further pressuring the bottom line of domestic companies.

While the initial Trumpian trade storm has hit, additional clouds form on the horizon.

As the U.S. seeks to crack down on transshipped products entering the U.S., the Department of Justice has announced it will increasingly rely on the False Claims Act to sanction companies that present false country of origin documentation. Expect unprecedented levels of scrutiny. Sector-specific national security tariffs that have already been implemented or will soon be -- for instance, 25% to 50% tariffs on autos, steel and aluminum, and pharmaceutical tariffs the president has threatened at 250% -- could make the reciprocal tariffs look like a warm-up act.

Bear in mind the U.S. will continue to hold the prospect of higher tariffs over its heads of trade partners like the sword of Damocles if dissatisfied with the implementation of the investment or purchase commitments made in any of the recent trade deals. Indeed, the prospect of further tariff increases will be ever-present for any partner should the U.S. be dissatisfied with the trade treatment it receives, or as seen with Brazil and India, on issues entirely unrelated to trade. Worse yet, trade volatility and trade actions will not emanate solely from Washington.

Beijing has also signaled its willingness to pressure companies caught between the two countries. Its anti-foreign sanctions law will punish companies that comply with U.S. sanctions against China -- a particular problem for companies seeking to adhere to the U.S. anti-forced labor laws.

Governments around the world are looking to build a new global trading system following Trump's destruction of the old one. But it will not happen anytime soon. Even if they could agree on a new system, for many countries and companies, no one can replace the U.S. consumer. Trump does have "all the cards" in this regard.

A shared aversion to Trump's trade wars may unite Asia thematically, but sentiment alone cannot anchor a sustainable economic architecture. Governments, corporate executives and investors need to anticipate and strategize responses to the second, third and fourth waves that will soon be breaking onshore. Trump's trade policies will not make anyone -- America or Asia -- great again anytime soon.



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