Southeast Asia, under the heavy hammer, dare not "retaliate"

Under Trump's "reciprocal tariffs" pressure, Southeast Asian countries choose negotiation instead of retaliation, hoping to avoid the escalation of a trade war. Vietnam actively contacted Trump and expressed willingness to self-lower tariffs to zero, Cambodia promised to significantly reduce its tariffs on American goods, and Thailand also hastily expressed willingness to dialogue with the US. Southeast Asian countries hope to gain U.S. "preferential treatment" by actively releasing goodwill. However, is it useful not to retaliate? Singapore Prime Minister Lee Hsien Loong made a thought-provoking speech on Friday: the United States is no longer promoting multilateral trade rules, but instead implementing a new policy of levying "reciprocal tariffs" on a country-by-country basis, which is equivalent to abandoning the WTO framework. The era of rule-based global trade has ended, and investors need to be prepared for a more protectionist and dangerous world. If other countries imitate the United States and adopt unilateral trade policies, small countries will face the risk of marginalization. Southeast Asia becomes the biggest victim of the tariff storm For years, countries such as Vietnam, Cambodia, and Thailand have been striving to become the "next China", producing bags, electronic products, shoes, and automotive components that are ultimately sold to the United States. After President Trump imposed the harshest tariffs on Southeast Asian countries on Wednesday, this situation is about to change. Given the escalating tensions in the US-China trade relationship, this news is a heavy blow to US companies that rely on factories in the region. Some can't help but ask: what to do now? Citing Nomura Securities' chief economist for Asia outside of Japan, Sonal Varma, media reported, "This is much worse than most of us expected." Southeast Asian countries suffered unexpectedly severe tariff penalties. Vietnam and Cambodia face new tariffs of 46% and 49%, respectively, while Thailand and Indonesia face tariffs of 36% and 32%, respectively, which are among the highest tariff rates globally. Negotiation instead of retaliation: survival strategy for Vietnam and Cambodia Unlike China's immediate retaliation, Southeast Asian countries have expressed willingness to negotiate with the Trump administration to avoid a significant impact on their economies by tariffs: Vietnam Facing a 46% reciprocal tariff, it is one of the most severely affected countries in Asia apart from Cambodia. Vietnamese Prime Minister held an emergency cabinet meeting to discuss measures and expressed willingness to lower tariffs on American goods and increase imports. Vietnamese leader To Lam had a "productive" conversation with Trump and the two plan to meet. Cambodia Facing a 49% reciprocal tariff, it is the country with the highest tariffs among Asian economies. Cambodia promised to cut tariffs on American goods and facilitate the import of American products. Thailand Facing a 36% reciprocal tariff, the United States is Thailand's largest export market. The Thai government emphasized readiness to "engage in dialogue" with Washington and enter into negotiations while encouraging companies to "explore new potential markets" to cope with the tariff impact. Indonesia Facing a 32% reciprocal tariff. Indonesia pledged to relax trade rules and will send a delegation to Washington next week for negotiations. Malaysia Facing a 24% reciprocal tariff. As the rotating chair of ASEAN, Malaysia expressed its intention to continue engaging with Washington to seek a fair solution and coordinate collective responses to tariff issues with other ASEAN member countries. Philippines Facing a US reciprocal tariff of 17%, lower than Thailand and Vietnam. Some companies are already planning to shift some production from Thailand and Vietnam to the Philippines to avoid higher tariffs. Singapore warns: the era of rules has ended Singapore Prime Minister Lee Hsien Loong made a thought-provoking speech on Friday, warning that the possibility of a full-blown global trade war is increasing. "More and more countries are acting in their narrow self-interest and using force or pressure to achieve their goals," he said. "This is the harsh reality of our world today." Lee warned that the implementation of the US "reciprocal tariffs" marks the end of the rule-based globalization and free trade era, and the world is entering a new stage that is more arbitrary, more protectionist, and more dangerous. He pointed out that the United States is no longer promoting multilateral trade rules, but instead implementing a new policy of levying "reciprocal tariffs" on a country-by-country basis, which is equivalent to completely abandoning the WTO framework. Although Singapore is placed in the initial tariff level with a 10% tariff, and currently has limited direct impact, Lee expressed deep concerns about the future. He stated that if other countries imitate the United States and adopt unilateral trade policies, small countries will face the risk of marginalization. He further warned that as countries may take retaliatory measures against the United States, the likelihood of a global trade dispute eruption is rising, trade and investment will be affected, global economic growth will slow down, and Singapore will face greater impacts due to its high dependence on trade. Lee also made an ominous comparison with the 1930s, when trade tensions escalated, eventually leading to armed conflict and the outbreak of World War II. Unlike most countries, Singapore has explicitly stated that it will not adopt retaliatory tariffs against the United States. Supply chain restructuring is imminent Trump's tariff policies have dealt a significant blow to U.S. companies that rely on Southeast Asian supply chains. According to The New York Times, U.S. business figures like Patrick Soong are already considering relocating production from Thailand and Vietnam to the Philippines, which has a lower tariff rate of 17%. Sportswear manufacturers have been particularly hard hit. Regulatory documents show that about half of Nike brand shoes and 39% of Adidas shoes are produced in Vietnam, which is their largest shoe supplier. Analysts at investment bank Jefferies estimate that only about 2.5% of apparel and 1% of shoes in the U.S. market are domestically produced. According to the Vietnam Textile and Apparel Association, Vietnam exported $44 billion worth of textiles last year, with the United States being its largest market. english:After the news of tariffs spread, trillions of dollars in market value have evaporated from the global market, triggering widespread economic recession warnings. Although news of a possible agreement with Vietnam has boosted the stock prices of American sportswear manufacturers such as Nike and Lululemon, investors need to carefully evaluate the profound changes in the future global trade landscape. As trade protectionism sweeps the globe, investors should closely monitor the progress of negotiations between countries and the US, and reassess the long-term prospects of companies relying on the Southeast Asian supply chain. As warned by the Prime Minister of Singapore, we may have entered a new era of global trade where rule-based systems have been replaced by more arbitrary and protectionist strategies. Is it useful if we do not fight back? While Southeast Asian countries choose to make concessions in exchange for negotiation space, the US Department of Commerce announced on Saturday that it would impose anti-dumping duties of up to 88.12% on zinc-coated steel products from Vietnam. This news once again confirms the warning of the Prime Minister of Singapore: in an era where rules collapse, compromise may not necessarily bring about reciprocal goodwill. As pointed out in an article by Yuyuantan Tian on Saturday, the US negotiation tactics are based on the "leverage principle", which involves controlling resources or demands that the other party urgently needs, and exerting pressure to force concessions. Any country subject to "equivalent" tariffs reveals a tentative, hesitant, or even compromising attitude in exchange for US tariff reductions, essentially handing over leverage that the US can use to exert pressure in negotiations. The cost of supply chain restructuring is now unavoidable - whether it is the loss of orders for Southeast Asian factories or the skyrocketing costs borne by American companies, both are exacerbating the cracks in the global economy. Faced with the Trump administration's tough strategy of using tariffs as bargaining chips, a sharper question arises: is it useful if we do not fight back? When rules are replaced by force, and goodwill is seen as weakness, perhaps only the "harsh reality" that Huang Xuncai mentioned can provide an answer. Who will be the next industry to be sanctioned? This article is reprinted from "Wall Street News", author: Pan Lingfei; GMTEight editor: Huang Xiaodong.