OTR: How Southeast Asia Negotiated Lower US Tariffs

Most Southeast Asian countries received a percentage ranging from 19% to 20%, a massive cut in comparison to the initial rates threatened by the Trump administration on April 2, a day the president had dubbed “Liberation Day.”

When President Trump returned to power, the Trump 2.0 administration adopted a far more aggressive trade stance. Its new policy, branded as “reciprocal tariffs,” caught global markets off guard with both its scale and severity. While several countries were affected, Southeast Asian nations, many of which have maintained large trade surpluses with the US, were particularly exposed to the initial high-rate proposals.

This was a sharp reversal for a region that had previously benefited from the first Trump administration's trade war with China.

In 2018, when Trump imposed massive tariffs on China, Beijing responded with its "China Plus One" strategy. This tactic involved shifting some manufacturing to Southeast Asian countries, a practice often called "transshipping", to avoid the high tariffs. As a result, nations like Viet Nam, Thailand, Malaysia, and Cambodia saw an influx of manufacturing and investment.

However, with Trump’s second term, these countries became targets themselves. The initial tariffs threatened by the administration were as high as 46% for some nations, with the goal of both pressuring China and stamping out transshipping.

After a series of intense negotiations, most Southeast Asian countries secured a much lower number than the initial threat.

But what concessions did these countries have to make to strike a deal?

This summary highlights the new tariff arrangements for Viet Nam, Philippines, Indonesia, Malaysia, Thailand, Cambodia, Singapore, Laos, Myanmar, and Brunei.

Before diving in, here are a few key trade terms used throughout the article:

• Trade - the buying and selling (or exporting/importing) of goods and services between countries.

• Trade deficit - when a country buys (or imports) more from other countries than it sells (or exports).

• Trade surplus - when a country sells (or exports) more to other countries than it buys (or imports).

• Reciprocal tariffs - when countries impose equal or matching tariffs on each other’s goods to maintain balance.

Illustration source: The White House/AMC

Viet Nam: A balancing act

The United States has long been Viet Nam's largest export market, and the resulting massive trade surplus has made it a prime target for President Donald Trump's "reciprocal tariffs." This trade imbalance, which he views as unfair, has been a central theme of his "America First" trade policy.

When Trump first announced a wave of new tariffs in April 2025, Viet Nam was hit with an initial 46% rate. Experts were quick to warn that if this high percentage was imposed, it would have a devastating effect on the Vietnamese economy, given its heavy reliance on exports.

Viet Nam's manufacturing industry is a significant player in the global supply chain, producing everything from electronics to clothing. It is a key supplier for major international brands such as Apple, Nike, and Adidas, among others.

According to the United States Bureau of Economic Analysis, in 2024, the United States recorded its third-largest trade deficit with Viet Nam, totalling US$123.5 billion, meaning the US imported significantly more from Viet Nam than it exported there.

During Trump's first term, when the US and China were engaged in a trade war, Viet Nam became one of the biggest winners. Many Chinese manufacturers relocated their production facilities to Viet Nam to avoid the tariffs imposed on Chinese goods.

However, under "Trump 2.0," Viet Nam could no longer avoid scrutiny. The hefty 46% tariff threat made it clear that Viet Nam's success as a manufacturing hub was now a direct target.

Recognising the potential ripple effect on their economy, the Vietnamese government actively reached out to the White House. They pledged to buy more American products and, in a move that would have been unthinkable previously, even considered purchasing American F-16 fighter jets.

This diplomatic push led to a breakthrough. On July 2, 2025, Trump announced a trade deal with Viet Nam that lowered the tariff rate from the original 46% to 20%.

However, there was a significant catch: the 20% tariff only applies to goods that are "made in Viet Nam," meaning they must be assembled and manufactured in the country. Any products found to be "transshipped", particularly those of Chinese origin that were simply routed through Viet Nam to avoid US tariffs, will face a much higher 40% tariff when they reach the American market.

This deal is not without its difficulties for the Vietnamese. Many of their materials, parts, and machinery are sourced from China. The new trade framework forces them to re-evaluate their supply chains to ensure they meet the "made in Viet Nam" criteria.

Trump claims that Viet Nam will impose “no tariffs” on all imports from the US. Tellingly, the Vietnamese leadership has said nothing about the deal.

Ultimately, while the trade deal may have improved relations with the US, Viet Nam is in a delicate position. It needs the US as a market for its goods, but it also relies heavily on trade and political support from China. Hanoi cannot afford to antagonise either of its major partners, making its balancing act between the two superpowers more precarious than ever.

The Philippines: A test of alliance

The Philippines, the United States' longest and strongest ally in Asia, initially seemed to receive more favourable treatment than its Southeast Asian neighbours when a 17% reciprocal tariff was announced in April 1. However, a recalculation in July saw the proposed tariff rate adjusted to 20%. Following this, a letter from the Trump administration informed the Philippines of the change.

Last year, the US bought nearly US$5 billion more in goods from the Philippines than it sold, out of a total two-way trade worth US$23.5 billion.

Given the long-standing alliance, forged during the Philippines' time as a US commonwealth, it was no surprise that its current President, Ferdinand "Bongbong" Marcos Jr., was the first Southeast Asian leader welcomed by Trump to the Oval Office during his second term.

During his White House visit, Marcos negotiated a deal with Trump to lower the proposed 20% tariff to 19% on Philippine goods entering the US market. This 1% "discount" was given in exchange for the Philippines providing open market access to the US. While Trump's announcement on social media suggested a blanket "zero tariffs" policy on US exports, Marcos later clarified that this primarily applied to American automobiles, with further details still being worked out.

Trump publicly praised President Marcos Jr. as a "tough negotiator." However, some experts argue that the Philippines, as a key US ally, should have secured a more substantial tariff reduction, especially given its strategic military support and crucial role in the US Indo-Pacific strategy. Several experts and lawmakers in Manila expressed disappointment, with some describing the outcome as "humiliating" and "unfair."

During the talks between the two leaders, Trump told Marcos Jr. that he could "make a deal with China if he wants to." This was followed by a statement, "I've always said [to Marcos] 'make the Philippines great again'. Do whatever you need to do. Your dealing with China would not bother me at all."

US President Donald Trump and Philippine President Ferdinand Marco Jr. on July 20, 2025. Image: The White House Gallery

Filipino political analyst Aries Arugay argues that Trump’s “America First” policy shows why the Philippines should not “put all its eggs in the US basket,” as the US will always prioritise its own interests. He contends that the Philippines must shape its foreign policy based on its own needs and diversify its global partnerships.

Beyond trade, the two leaders also discussed military cooperation, building on decades of partnership under the Mutual Defense Treaty. This may include plans for the US to develop the former naval base at Subic Bay into a major "Ammo Hub" for ammunition manufacturing and storage. This comes amid escalating tensions in the West Philippine Sea, where the Philippines has been clashing with China's coast guard within its Exclusive Economic Zone. While the US has reaffirmed its willingness to defend the Philippines against Chinese "aggression," the new trade deal and Trump's rhetoric about China have complicated the narrative, prompting the Philippines to carefully balance its security alliance with the US against its vital economic and political ties with China.

Indonesia: Concessions for a tariff truce

Indonesia has secured a reciprocal trade agreement with the United States that sets a 19% tariff on its exports, a rate identical to what the Philippines received.

In an interview, President Donald Trump praised the deal with Indonesian President Prabowo Subianto as a significant victory for America. He stated that the US gained "full access" to the Indonesian market with zero tariffs, a feat he claimed had "never" been achieved before. While Trump's rhetoric suggested a complete elimination of tariffs, the agreement specifies that Indonesia will eliminate tariff barriers on a preferential basis for over 99% of US products, a substantial concession nonetheless.

This agreement was reached after a period of intense negotiation. Initially, Trump had threatened Indonesia with a much higher 32% tariff. Following discussions, Trump withdrew the threat and the deal was finalised.

As part of the agreement, Indonesia has committed to several major purchases from the US, including an estimated US$15 billion in energy products, 50-75 Boeing jets, and US$4.5 billion in agricultural goods. The deal also includes Indonesia's commitment to remove restrictions on exports to the US for industrial commodities, including critical minerals.

For Indonesia, this deal is seen as a way to avoid a potentially devastating trade war. The 19% tariff, is a significant reduction from the 32% that was initially threatened. The near-zero-tariff access for American goods is a major concession, but the Indonesian government has framed it as a necessary trade-off to protect its export-oriented industries from even higher tariffs.

The deal levels the playing field in the US market, positioning Indonesia competitively against other Southeast Asian nations, most of which have also settled on a similar 19-20% tariff rate. For instance, Indonesian officials have noted that the 19% tariff gives them an advantage over competitors like India, which faces a 25% tariff on its exports to the US.

Malaysia: More pledges, lower tariff

In an effort to avert a trade dispute, Malaysia has pledged over US$240 billion in purchases and investments to the United States. Concurrently, it has agreed to reduce or eliminate duties on 98.4% of US imports and to ease certain non-tariff barriers.

This deal came after the US had threatened to impose a 25% tariff on Malaysian goods, citing a growing trade imbalance. The US had seen Malaysia's significant trade surplus as unfair and used the threat of higher tariffs as leverage to push for more balanced trade.

To avoid the full 25% tariff, Malaysia presented a series of high-value deals. It pledged to spend up to $150 billion over the next five years on American products, with focus on high-tech sectors like semiconductors, aerospace, and data centres.

In addition, Malaysia's state-owned company, Petronas, committed to buy approximately US$3.4 billion worth of American natural gas annually. The country also promised a further US$70 billion in direct cross-border investments into the US economy over the same period.

These concessions successfully de-escalated tensions and convinced the US to lower the proposed tariff rate to 19%.

In exchange, Malaysia agreed to simplify market access for US businesses. It will remove or reduce tariffs on most American goods entering the country and will lift certain non-tariff barriers, such as revenue-sharing requirements for foreign cloud and social media services.

However, Malaysia made it clear it would not compromise on key national interests. The government refused to change its halal certification rules, lower taxes on alcohol and tobacco, or allow increased foreign ownership in strategically important domestic industries.

Importantly, Malaysia also declined to grant the US exclusive access to its rare-earth minerals, which are vital for producing batteries and electronics. This strong stance on national sovereignty was highlighted by Malaysian officials as a major achievement of the negotiations.

Thailand and Cambodia: Immediate ceasefire for 19%

An intense trade standoff was recently averted when the United States, Thailand, and Cambodia finalised new trade agreements.

The new deals set a 19% tariff on exports from both Southeast Asian nations, a significant reduction from the 36% rate that had been initially imposed.

The lowering of the tariffs followed an immediate ceasefire order from US President Donald Trump, who had warned that trade deals would not proceed until a deadly border conflict between Thailand and Cambodia had ceased.

The ceasefire, brokered with the help of Malaysia, was crucial to the negotiations, with Cambodia's Deputy Prime Minister even suggesting Trump deserved a Nobel Peace Prize for his intervention.

Thailand and Cambodia agreed to an immediate and unconditional ceasefire during talks held in Malaysia on July 28, 2025. Image: Hun Manet/Facebook

Thailand, which had a considerable trade surplus with the US, agreed to a range of concessions. To address the imbalance, the country will reduce its trade surplus by 70% over the next five years. To achieve this, it has committed to implementing zero tariffs on more than 10,000 import items from the US. These items include things like advanced automotive components and medical instruments that are not widely produced in Thailand.

Additionally, Thailand's public and private sectors have pledged to purchase a substantial amount of US liquefied natural gas and Boeing aircraft. The country is also offering investment incentives and fast-track services to attract American companies in key sectors like clean energy and technology.

A crucial concession for the US was Thailand's agreement to a stricter product origin verification system. This is aimed at preventing Chinese goods from being transshipped through Thailand to avoid US tariffs, with a potential 40% tariff penalty on goods found to have evaded origin rules.

The Thai government was able to protect some of its domestic industries, however, by retaining existing tariffs on certain strategic goods and placing a small quota on US pork imports.

Like Thailand, Cambodia also managed to negotiate a reduction from its initial 36% tariff to 19%. This was a major victory for Cambodia's export-driven economy, as the country had been threatened with a tariff as high as 49% at one point. As part of its deal, Cambodia has also committed to imposing zero tariffs on all American goods. This was a key bargaining chip for them during the negotiations.

Both Thailand and Cambodia have been key beneficiaries of the China Plus One strategy, this has resulted in significant Chinese investment in both countries. However, the new US trade deals and the strict rules on transshipment are now forcing these nations to carefully reassess this strategy.

Brunei: Just above the rest

Slightly above the rest, the United States imposed a 25% tariff on Brunei Darussalam, the only country in Southeast Asia’s Maritime Crescent to face this specific rate. This represented a slight increase from the initially proposed 24% rate in April.

In a letter sent to the Sultan of Brunei in July, President Trump raised the rate by 1%, but also offered a pathway to avoid the tariffs entirely by manufacturing goods in the United States.

Trump clarified that the 25% tariff would apply in addition to any existing sector-specific levies. He also warned that if Brunei responded with reciprocal tariffs, then equivalent tariffs would be added to the levies the US has already imposed on Iraq.

On Truth Social, Trump wrote: “Please understand that the 25% number is far less than what is needed to eliminate the Trade Deficit disparity we have with your country.”

Brunei’s total trade with the US stood at US$395.7 million in 2024, with exports valued at US$175.7 million and imports at US$220 million. Brunei’s major exports to the US include chemicals, mineral fuels, and machinery and transport equipment. Its main imports from the US are machinery and transport equipment, miscellaneous manufactured articles, and chemicals.

While Brunei’s government has not issued a formal public response, the Ministry of Finance and Economy (MOFE) released a statement that it is “assessing the potential impacts” and is engaged in “technical discussions” with US officials to clarify and negotiate the rate. The MOFE is also working with local exporters affected by the decision.

Singapore: Treated like a customer, not a partner

While Singapore avoided the harshest rates, receiving only a base 10% tariff, the implications for its export-driven economy remain significant.

Prime Minister Lawrence Wong has described the move as a “fundamental rupture” in the global trade system and signalled that Singapore will need to brace for long-term structural shifts.

The tariffs, announced by Trump in April apply across the board regardless of whether a country runs a trade surplus or deficit. Singapore, despite having a trade deficit with the US and a bilateral free trade agreement (FTA), was not exempted.

Addressing Parliament, Prime Minister Wong expressed strong disappointment over the decision:

Ministerial statement by Prime Minister and Minister for Finance Lawrence Wong on the US tariffs and their implications on April 8,2025. Image: AMC

In response, Singapore has formed a high-level Economic Resilience Task Force to monitor the evolving situation and support affected businesses and workers.

The task force will bring together officials from key economic agencies as well as representatives from the business and labour sectors. Its immediate priority is to assess the impact on export-oriented industries like electronics, semiconductors, logistics, and biomedical services—sectors that make up a significant portion of Singapore’s GDP.

While Singapore did not face the same drastic initial tariff rates as others, it did not walk away from the negotiations without compromise. To help secure the 10% base tariff, Singapore agreed to a number of concessions aimed at addressing US concerns:

• Zero-tariff access for a broader range of American goods, particularly in the pharmaceutical and aerospace sectors.

• Streamlined import licensing and customs clearance for selected US products to reduce red tape and delays.

• Public sector procurement pledges, with Singapore agencies committing to purchase more American-made goods and services, especially in defence and healthcare technology.

• Closer cooperation on transhipment controls, including enhanced origin verification processes to prevent rerouting of Chinese goods through Singapore—a growing concern in the US.

Despite these trade-offs, Singapore has chosen not to impose retaliatory tariffs of its own, citing concerns over rising consumer costs and reduced competitiveness.

However, government officials have warned that the city-state remains highly vulnerable to any wider collapse in global demand. The Ministry of Trade and Industry has already downgraded the country’s GDP growth forecast for 2025 from 1–3% to 0–2%, following signs of economic contraction in the first quarter.

While Singapore has not been a major beneficiary of the China Plus One strategy compared to neighbouring countries in Southeast Asia, its role as a regional trade and logistics hub places it at the centre of shifting global supply chains.

The new US tariffs, and the geopolitical recalibration they represent, could force Singapore to reassess how it balances its strategic partnerships with both Washington and Beijing.

The formation of the task force underscores the government’s concern that this is not merely a temporary trade spat, but a systemic transformation in how global commerce will be conducted. PM Wong cautioned Singaporeans: “This is not a passing storm. It is a new climate altogether.”

Myanmar and Laos: Stuck at 40%

In contrast to their neighbours in the region, Laos and Myanmar are facing a more difficult trade relationship with the United States. While other nations were able to negotiate favourable tariff rates, Laos and Myanmar are now subject to a high 40% import duty on their goods, a rate that is second only to Syria's.

This tariff rate reflects the stalled negotiations and lack of alignment with US trade and security priorities.

For Laos, the new tariff is expected to significantly impact its export-driven economy, especially its garment and textile sectors. Although the country saw a minor reduction from an initial 48% rate, the inability to secure a more substantial concession is a sign of the ongoing challenges in its trade relations with the US.

Washington has also expressed concern over Laos's increasing economic reliance on China and the debt from Chinese infrastructure projects.

Myanmar is in an even more precarious position. The 40% tariff is expected to deepen the economic crisis that began with the military coup in 2021. The country is already under US sanctions due to the junta's use of violence and suppression of democracy. With its trade with the US already at a low of US$734 million last year, the new tariffs will further hinder its ability to engage in international commerce and will likely contribute to its deepening economic collapse.

Nevertheless, Myanmar’s military-led government remains hopeful about securing a better deal through ongoing negotiations with Washington. In return, it has offered to slash its own tariffs on American goods, from 88% down to 0%, and even proposed sending a high-level trade delegation to the US. While the country’s trade with America is relatively small, the junta sees easing tariffs as a potential economic lifeline amid sanctions, civil unrest, and a crumbling economy.

The high tariffs on both Laos and Myanmar reflect the United States' broader shift toward leveraging trade policy to address economic imbalances and encourage strategic realignment. The new rates are seen as part of efforts to reduce reliance on China and strengthen ties with key partners in the region.

Myanmar's economy, particularly the manufacturing sector, has suffered significantly under the junta's rule since the 2021 coup. Image: Wiki Commons

Following months of intensive negotiations, Southeast Asia is adjusting to a changing trade landscape shaped increasingly by bilateral agreements and evolving geopolitical dynamics. While the region avoided the most severe tariff outcomes, the trade-offs made highlight the complexities of maintaining access to the US market.

Looking ahead, countries face not only economic considerations but also strategic ones—finding ways to remain competitive while navigating relationships with major powers pursuing divergent interests.

-Asia Media Centre