Southeast Asian governments are celebrating lower-than-anticipated US tariffs as a diplomatic success, but the region’s poorest are still likely to shoulder the heaviest burden of the trade dispute—making the victory potentially short-lived.
Trump’s Tariffs: Could They Widen Southeast Asia’s Wealth Gap?
Many Southeast Asian nations breathed a sigh of relief after the Trump administration scaled back its initial tariff threats. While the US still imposed trade penalties, countries in the region managed to secure significantly lower rates compared to other parts of the world.
Cambodia’s tariffs were reduced to 19% from a threatened 49%, helping protect its vital garment industry that employs around 800,000 workers, mostly women from rural areas. Vietnam, with one of the largest trade surpluses with the US, saw rates cut to 20% from 46%. Thailand, Malaysia, Indonesia, and the Philippines negotiated 19% tariffs, while Singapore received the lowest rate at 10%. In contrast, Myanmar and Laos were hit with steep 40% levies, placing them among the hardest-hit nations globally.
However, the relief may be short-lived. As part of the negotiations, most Southeast Asian countries agreed to reduce taxes on US imports to nearly zero—benefiting high-end consumers but offering little to low-income households. Economists warn that Trump’s trade policies could hurt the region’s poorest, particularly if labor-intensive industries like garment manufacturing decline.
A potential shift of investment from manufacturing to technology could further impact lower-skilled workers, as the tech sector employs fewer people. If the transition is slow, unemployment and wage stagnation could worsen wealth inequality.
Malaysia, a major semiconductor exporter, claims its chips are exempt from tariffs, but the US has imposed 100% penalties on certain imports, raising concerns over long-term stability. Additionally, an influx of cheap Chinese goods—caused by China redirecting exports away from the US—has already begun affecting local industries, potentially suppressing wages and slowing wealth accumulation.
Another looming threat is Washington’s plan to impose 40% tariffs on goods it deems “transshipment”—products originating from China but re-exported through Southeast Asia with minimal modifications. If defined broadly, this could devastate industries reliant on imported raw materials from China.
