Asia| US reciprocal tariffs offer no help in narrowing trade deficits with Asian economies

Summary

This report examines U.S. reciprocal tariffs on Asian economies after President Trump’s announcement to match trading partners' tariffs. Findings show these tariffs won’t significantly cut U.S. trade deficits, as imbalances stem from comparative advantages, supply chains, and production costs, not tariff rates.

Key points

• Key points:
• Reciprocal tariffs won’t reduce U.S. trade deficits because trade imbalances are driven by supply chains and competitive advantages, not tariff rates.
• India and Thailand face the highest risks, while Vietnam and Indonesia are least affected due to their existing tariff structures.
• Key industries at risk include India’s textiles, Thailand’s plastics, Japan’s autos, and the Philippines’ metals.
• MFN rules prevent selective tariff cuts, making it difficult for Asian countries to lower tariffs only for the U.S.
• More protectionist measures are expected, in addition to the 25% U.S. tariffs on cars, semiconductors, and pharmaceuticals.

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