The Trump Trade

What Asian economies can expect in 2025

Editor’s note:

While President-elect Donald Trump’s tariff policies represent a significant trade risk, they are one piece of a larger puzzle. Global trade faces a range of destabilizing threats, from potential conflicts in Taiwan to energy disruptions in the Middle East, and shifting supply chain dynamics. Policymakers in the Asia-Pacific region—and globally—must focus not only on reacting to a new US administration, but also on developing robust strategies to navigate an increasingly fragmented global economic order.

Details are emerging. It was just announced that the Trump Administration will immediately levy a 25% tariff against both Canada and Mexico. For China, it will mandate an additional 10% in retaliation for drug smuggling and illegal immigration, in addition to the 60% that has been threatened. The question remains: Are these promises, or negotiation tools? Analyst Marsha Vande Berg does a deep dive into the likely reactions to increased US sanctions in China. Markets are reacting with a strengthening dollar.

Credit: Asia Times

Is Past Prologue?

In 2017, when Donald Trump became president for the first time, the US unilaterally withdrew from the Trans-Pacific Partnership (TPP) signaling a shift in US trade strategies.¹ ²

This was superseded by a new free trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which has now been ratified by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

The purpose of TPP— and now of the CPTPP— is to embrace the front and center missions of multilateral trade agreements: reducing tariffs and barriers to trade and streamline cross-border regulatory frameworks. The US, however, is traveling in the opposite direction, while Japan has raised objections to China’s application for membership.

The Promise of Tariffs

The prospect of President-elect Donald Trump delivering on his campaign promise to impose sweeping tariffs and catalyze his “America First” program is driving fears in the Asia-Pacific region that the intention is also to unwind US leadership in the institutional underpinnings of multilateral trade.

At the heart of the matter is whether the reelected president who takes office on Jan. 20 actually delivers on the threat of levies against US trading partners other than China. Beijing could be hit with a whopping 60 percent levy on its exports to the US. Some believe the intention of Trump, the self-declared “tariff man,” is merely to establish leverage and use the threat of tariffs like a sword of Damocles to force concessions favorable to Washington.

The issue is whether the sword can withstand political gravity— metaphorically speaking.