Trump’s 14-Nation Tariff Plan Unnerves China and Pressures Southeast Asia

US Tariff Strategy Targets China’s Trade Partners

When US President Donald Trump signed an executive order on Monday to extend a pause on “reciprocal” tariffs until August 1, it offered little comfort to China. Instead, Beijing’s policymakers may feel increasingly cornered, as Washington also moved to target 14 countries—many of them China’s close trading partners—with tariffs of up to 40 per cent. This came despite breakthrough talks in London that laid the groundwork to remove most bilateral export controls, from China’s rare earth restrictions to US aircraft engines and chips.

Analysts said the latest US tariff package was a calculated strategy to isolate China and strengthen Washington’s position in coming trade negotiations, as the 90-day trade truce agreed in May is set to expire in early August. According to Xu Weijun, an assistant research fellow at the Institute of Public Policy at South China University of Technology, “Trump’s newly announced tariffs… are a continuation of this decoupling agenda.” He added, “It’s both pressure and division: the message is clear—’cooperative’ countries like Vietnam get preferential treatment, while others face high tariffs.”

“The goal is to force Southeast Asian countries to choose sides and join the US effort to isolate China economically,” he said. Alongside 25 per cent tariffs on Japan and South Korea, the US focused heavily on Southeast Asia—now the top destination for Chinese exports after surpassing the European Union and the US. Six members of the 10-nation Association of Southeast Asian Nations (Asean) received tariff letters: 25 per cent on Malaysia, 32 per cent on Indonesia, 36 per cent on Cambodia and Thailand, and 40 per cent on Laos and Myanmar—the highest among the 14 countries included in the package.

Those spared included Singapore, with which the US has a trade surplus, and Vietnam, which recently announced a deal with Washington. Steven Okun, CEO of APAC Advisors, a geopolitical advisory firm based in Singapore, said, “Washington’s duties were also a response to China’s industrial policy. The latest tariffs show Trump has a real issue with Southeast Asia, which has become a magnet for Chinese investment and exports, resulting in increasing US trade deficits with much of Asean.”

The 10-nation Southeast Asian bloc is considered the most important region for transhipping Chinese exports to the United States. “The US is targeting transshipments to undermine China’s role in the supply chain,” said Zhu Keli, a director and founder of the International New Economic Research Institute. Morgan Stanley estimated that if the new duties take effect, the weighted average tariff rate for Asia would jump to 27 per cent—warning that trade tensions were returning to the fore.

“We think this moves us towards the tactical escalation scenario,” its chief Asia economist, Chetan Ahya, wrote in a note on Tuesday. “This development, plus potential implementation for sectoral tariffs on pharma and semis, China negotiations and the transshipment issue suggest that uncertainty will likely persist, weighing on corporate confidence, capex and the trade cycle.”

The other nations that received letters—Kazakhstan, South Africa, Bosnia and Herzegovina, Bangladesh, Serbia and Tunisia—are all members of various China-led initiatives such as the Belt and Road. Beijing has adopted a tit-for-tat approach to Washington’s tariff war. The strategy, combined with its economic resilience and export controls, has secured it more face-to-face talks than other countries.

Chinese officials have also issued a strong message to other countries, warning them not to reach a deal with the US at China’s expense. He Weiwen, a senior fellow at the Beijing-based think tank Centre for China and Globalisation, said Trump’s unilateral tariffs underscore his failure to reach agreements with trading partners within the 90-day period. Despite the higher tariffs that Vietnam now faces, China still has a chance, he argued, citing the competitiveness of Chinese companies.

The 40 per cent transshipment tariff imposed on Vietnam is lower than the rates applied to goods exported directly from China. According to UBS estimates, the total weighted average US tariff rate on Chinese products now stands at about 43.5 per cent, including pre-existing duties imposed in previous years. Morgan Stanley put it at around 42 per cent.

“In the case of Vietnam, the next step is to define what constitutes transshipment and what origin content percentage is required to determine whether a product is locally made,” he said. Trump’s tough stance on Beijing’s partners—including a 10 per cent tariff threat on Brics developing nations—stands in sharp contrast to his approach to China’s competitors.

The US intends to use these negotiations to pressure countries to curtail trade and investment ties with China. Stephen Olson, a visiting senior fellow at ISEAS-Yusof Ishak Institute, said the deals with the UK and Vietnam were “vaguely worded” framework agreements that are sparse on details. But one thing is clear. “The US intends to use these negotiations to pressure countries to curtail trade and investment ties with China. That will inevitably bleed over into US-China discussions and obviously complicate third country relationships with China,” he added.