Asian trading partners in ‘no-win’ situation as Trump threatens more tariffs | The World | ABC NEWS
Well, just one day after extending the deadline for introducing higher tariffs on key trading partners, the Trump administration has announced yet more tariffs for a spate of countries. Japan and South Korea imports are among those to be slogged with raised levies from August the 1st, but the US has left the door open to more extensions. Let’s get more on this with APEC Advisors Chief Executive Steve Oaken. Steve, good to have you with us again this evening. Now um Donald Trump, he’s written some quite interesting letters uh that we’ve seen to the Japanese prime minister and the South Korean president and among others. Now the essence was basically to address uh trade deficits with with those two countries at least. But he’s given them more time. So So what is Donald Trump playing at here? Now, Donald Trump knows he has all the cards in his parlance when it comes to Japan and and South Korea in particular, and he is going to play those and he is going to put as much pressure as they as he can to get a deal that is completely in the interest of the United States. Doesn’t matter that Japan and South Korea are two treaty allies of the United States. Doesn’t matter that they are key to really US engagement in the Indo-Pacific. It doesn’t matter that there was a free trade agreement or is a free trade agreement that he signed with with South Korea. He amended the FTA with South Korea. Signed his own agreement with Japan. That is all irrelevant. So Donald Trump is going to use all the leverage he can to get the best deal for the United States and it is going to hurt the economies of Japan and South Korea. And I think it’s going to hurt the United States geopolitically long term. Yes. And do you think uh Japan and South Korea will be making any sort of concessions? It look it is a very difficult choice for them because you can’t negotiate right now with the United States because the United States is not giving all the information needed to its and I’ll use this term loosely trading partners, right? Because what Japan and South Korea want to know is if we negotiate with you, we need to be certain and this is what trade agreements are all about. We need to be certain that the rules are going to be set going forward so that people and businesses and investors can make long-term decisions. And the United States is saying, “We’re only going to negotiate with you on these reciprocal tariffs, these tariffs that are in place because of of the president’s use of of national emergency and national security terms. But you’ve got other tariffs that are looming out there on autos, on on steel, on aluminum, on semiconductors, on wooden lumber, on everything else. And the United States is not saying that that is not going to go and get and let the countries of Japan, South Korea, and others get hit. That’s why they can’t negotiate because they don’t know what they’re negotiating. It would be a real problem for them to to give in at this point. Yes. I mean, noting as well that, you know, companies like Hyundai Motors in South Korea, they’ve invested $21 billion to uh uh to have plants and factories in the US uh to be able to circumvent future tariffs. Looks like Donald Trump hasn’t seen them. But on the side of South Korea and Japan, would this be somewhat damaging for the leaders of both countries that they’ve perhaps been seen as a bit of a failure by two leaders by uh the uh respective electorates. They’re clearly in a no-win situation because if they hold tight, it is going to hurt their economies probably significantly in the short term. If they cave in, that is also not the look you want of your leader. and and and people in particular are being unfair to the the current Japanese administration because they’re saying, “Oh, look how great a job Prime Minister Abbe did in managing the US Japan relationship. And look what great a job he did in building a relationship with Donald Trump.” Look, it’s not fair because Trump 1.0 was an America first foreign policy. Trump 2.0 is turning out to be a Trump first policy and Donald Trump is making up different rules as it goes along. So you really have to feel from a domestic political uh perspective for the leaders of Japan and South Korea, they really are in a no-win situation right now. Yes. And both those countries are critical uh strategic allies um in the face of China’s growing influence, but also that of North Korea. So is Donald Trump risking a diplomatic fallout as well? I mean, look, you can there’s no question China is driving some of this and it’s really driving it if we want to talk about Southeast Asia, which got particularly hit hard by these tariffs announced by the president yesterday um in you know 25 30 up to to 40% even in Southeast Asia and the of the United States on Southeast Asia is because Southeast Asia is seen as a trans shipment point both legal and and from a trade perspective legal and illegally in that Chinese investment, Chinese goods are coming to Southeast Asia and being exported to the United States and and that is being seen as as a workaround. Now, the president and the United States should be working with Japan and South Korea and Southeast Asia because everybody has a lot of the same concerns about China. They have concerns about Chinese excess capacity. They have concerns about Chinese unfair trade practices. But instead of working collectively, um, Donald Trump is going allin on a one-on-one bilateral approach. And we have to see, is this going to actually backfire long-term on the United States and push Japan and South Korea and other countries closer to China than they want to be. And in the case of, you know, some of the countries you mentioned, you talked about Southeast Asia, Laos, Myanmar, Thailand have pretty high rates up to 40%. That that is the threat at least. uh it’s not been implemented yet. Um what else can countries like that the poorer countries of Southeast Asia particularly Laos and Myanmar even offer or are they just going to be resigned uh to whatever Donald Trump might or might not do? The two things they can offer is to lower their tariffs on US products coming into their countries. They can also address really serious non-tariff barriers that foreign businesses have in those countries. It could be restrictions on data flows. It could be cumbersome legal requirements. It could be tax rules that are not beneficial. And they could be offering those, but they’re not going to offer what Donald Trump wants. Look, they don’t have the money to buy Boeing aircraft. They don’t have the money to buy the goods the US manufacturers. They don’t have the money to invest in the United States. So unclear if he’s going to hold those countries to lowering their trade deficit with the lowering the United States trade deficit with them. They can’t do that. Yes. And how do you see markets finally, Steve? How do you see markets reacting? Because um it seems like investors might just be thinking that perhaps Donald Trump is playing chicken. He’ll ultimately, you know, not carry through. That’s how the market has been looking. Do you think that might still continue to be the pattern uh in the next couple of weeks? Well, it it it depends. It depends in large part on China because look, Japan and South Korea, as important they are, is is as global economies, they’re not going to move the United States market. They don’t have leverage over the United States. You know who has leverage over the United States? Of course, that’s China. And if if these if Japan and South Korea enter into an agreement with the United States that restricts trade between China and South Korea and Japan and then China retaliates, that will move the market. So, I think the word of of the day, of the week, of the month of of of the nearly 6 months of Donald Trump’s presidency, it’s uncertainty. We still have uncertainty. We’re going to have uncertainty going forward. And and we’re all waiting to see what happens between the US and China and also China and these other countries. That is where we will find out if Trump always chickens out really does happen this time. Okay, we’ll see Steve Oaken. Always great to get your analysis there from Singapore. Thank you. Thank you.
Several Asian countries are among more than a dozen that have been threatened with increased tariffs announced by the Trump administration in letters to foreign leaders this week. Major trading partners Japan and South Korea now face 25 per cent tariffs, set to take effect on August first. APAC Advisors CEO Steve Okun joined The World from Singapore to report on the political and economic implications of the trade war for major Asian economies.
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