05/11/2025

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Asean yielding or surviving tariffs? A S key players and stakeholders in the economic well-being of the Asean region assess the and predictability for key exports. 0 Economic concessions – Includes major purchase commitments (for example, Boeing aircraft and LNG) and facilitation of investments in the US. Some of these may settlement mechanisms. The US retains significant leverage, making it risky for Asean partners to challenge American actions. New and ambiguous rules on transshipment to counter China add significant uncertainty for businesses. interests and longer-term resilience have been subordinated to individual, short-term gains. T H E R T

leverage the US administration has used in the negotiations with Asean countries would be greatly reduced or even removed entirely. 0 The argument: Critics argue that by signing agreements while the tariffs are still being legally contested, Asean nations were negotiating from a position of weakness under duress. Had they waited for a favourable Supreme Court ruling, they may have secured far better terms or even the automatic removal of the tariffs without making the concessions included in the current deals. Market players in the US are expecting a close call on the Trump tariff case at the Supreme Court, with the latest news report predicting that there is a 60% chance that the court will rule against the president. Whatever the outcome of the Supreme Court decision, Asean member countries should consider individual and collective renegotiations of the trade agreements imposed by the US as soon as practicable. Such renegotiations could begin as early as next year, following the court’s ruling or could build on the outcomes of trade renegotiation agreements that other countries, including some of the US’s closest allies, are pursuing with the Trump administration. This renegotiation can allow Asean countries to drive home the disruption that Trump’s tariff policy has unleashed on the rules-based global trading system and its negative economic impact on Asean, which is a key player in global markets and supply chains. Equally important is the need to emphasise that the latest trade agreements are not only a violation of the World Trade Organisation’s rules but also a strategic blunder that will continue to diminish American influence and standing in the region. Lim Teck Ghee’s Another Take is aimed at demystifying social orthodoxy. Comments: letters@thesundaily.com

Optimistic defenders of the trade agreements reached have touted these quick deals as a pragmatic solution. Thus, they note that it can successfully avert an immediate economic crisis by preventing prohibitively high US tariffs. However, the agreements to date have come at the price of significant economic concessions, heightened risks with China and the acceptance of terms that heavily favours US leverage and interests. The medium and long-term consequences may be a weakening of Asean centrality as members are pulled deeper into the US-China rivalry. Meanwhile, it is necessary to highlight an important point missing from the recently concluded trade agreements: they are being legally contested in the US, which makes concerns of its premature responses stronger and more persuasive. US Supreme Court: How will it rule on Trump tariffs Today, the Supreme Court will hear arguments in a pair of challenges to Trump’s power to impose sweeping tariffs on virtually all goods imported into the US. The stakes are high as the cases are not only an important test of presidential power but also for their external impacts. 0 The lawsuit: The tariffs imposed by the current administration, largely under the International Emergency Economic Powers Act (IEEPA), are being challenged in US courts, with one case already appealed to the Supreme Court. Lower courts, including the US Court of International Trade and the Court of Appeals for the Federal Circuit, have ruled against the broad application of these tariffs, finding that they likely exceed the president’s authority under the IEEPA. The Supreme Court is expected to issue its ruling soon. 0 The risk: If the Supreme Court were to strike down or significantly restrict the tariffs, the primary

damage from President Donald Trump’s recent visit, particularly the trade agreements concluded or in their final making, one key concern is emerging. The key question is whether countries in the region have been or are being rushed into premature agreements and whether their leaders are “bending the knee” more than the historical context or current circumstances warrant. Those who refute this contention argue that it was necessary to secure a quick, and what some regional negotiators consider a “favourable”, deal by taking advantage of Trump’s well-known susceptibility to flattery and praise. However, no “special deal” appears to have been secured by any Asean member country from the summit meeting. This is clear from the summary of core trade- offs below. Pros (short-term benefits) 0 Market access – Maintains access to the US market by avoiding crippling tariffs (as high as 49%), providing at least temporary relief

be difficult or even impossible to fulfil due to production or regulatory constraints. Cons (long-term costs and risks) 0 Market vulnerability – The US can still unilaterally raise tariffs in the future on grounds of “national security” or other pretexts. Subsequent US trade deals with other countries could also erode any short-term competitive advantage gained. 0 Strategic and sovereignty costs – Agreements include “economic security” provisions targeting China, such as alignment with US export controls. This risks subcontracting national security interests to Washington and may provoke countermeasures from China, Asean’s largest trading partner – a concern widely voiced on social media. 0 Legal and enforcement issues – The deals lack traditional dispute A N O B Y L I M

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Key provisions of the deals The agreements signed with Malaysia and

Cambodia, along with frameworks for Vietnam and Thailand, share several key features that illustrate the are unprecedented in the region’s economic history: 0 Tariff structure: Asean countries like Malaysia and Cambodia agreed to eliminate or reduce their tariffs on a range of US goods. In return, the US agreed to cap its tariffs on its goods at no higher than 19%, a reduction from the initially threatened rates of over 40%. 0 Rules of origin and transshipment: A notable feature is the focus on preventing third countries, particularly China, from benefitting. The US is pushing for stricter rules and enforcement against transshipment, which involves Chinese goods being slightly processed or relabelled in Asean nations before being exported to the US. However, the lack of a clear, published formula for these rules creates uncertainty for regional supply chains. 0 A “least-worst option” in a prisoner’s dilemma: Supporters of the concluded agreements and those to come soon in the region see the bilateral deals as the least-worst option. Fearing that their neighbours may cut a deal first and gain a competitive advantage, each country has negotiated alone, undermining the collective bargaining power of Asean; and negating assertions by leaders of the importance of standing together. This has led to a situation where the region’s economic G H E E above trade-offs, which

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Critics argue that by signing agreements while the tariffs are still being legally contested, Asean nations were negotiating from a position of weakness under duress. – AFPPIC