Trade Agreements and Tariff Policies in Southeast Asia

Kuala Lumpur, Malaysia – The United States recently participated in the 47th Summit of the Association of Southeast Asian Nations (ASEAN) held in Malaysia. During the summit, several trade agreements were signed, including a ceasefire agreement between Thailand and Cambodia.

US Tariff Policies and Trade Agreements

On the sidelines of the summit, discussions were held between the US and ASEAN leaders regarding US tariff rates, which currently range from 10 percent for Singapore to 40 percent for Myanmar and Laos. This led to the announcement of reciprocal trade deals with Malaysia and Cambodia, as well as framework agreements with Thailand and Vietnam.

Malaysia secured tariff exemptions on some key exports in its trade agreement. However, many questions remain, particularly concerning potential tariffs on semiconductors and transshipments, which refer to goods routed through third countries to avoid existing tariffs.

Country-Specific Agreements

The agreements signed at the summit did not address semiconductors or specify rules for determining the “country of origin” for products crossing borders multiple times, which is crucial for Southeast Asia’s supply chains.

The deals with Malaysia, Thailand, Cambodia, and Vietnam set US tariff rates at 19 or 20 percent with various concessions. These include commitments to reduce non-tariff barriers, with Cambodia and Thailand pledging to eliminate tariffs on nearly all US imports.

Additionally, Malaysia, Thailand, and Vietnam agreed to purchase US agricultural products, aircraft, and offered concessions on digital services. Kuala Lumpur further committed $70 billion in capital investment in the US.

Strategic Cooperation and Industry Impacts

Thailand and Malaysia signed separate agreements to cooperate on supply chains of rare earths and critical minerals, such as nickel and cobalt, facilitating increased US investment.

These agreements provide some benefits to the region, such as Malaysia’s zero percent tariff on key exports including palm oil, rubber, and cocoa. According to industry experts, some measures in these agreements echo existing trade policies, imposing no additional regulatory burden on Malaysia.

The summit did not result in new trade negotiations involving larger regional economies like Indonesia and the Philippines. Furthermore, industry-specific tariffs on products such as automobiles, aluminum, steel, and pharmaceuticals were not discussed.

Enforcement and Future Implications

The enforceability of these trade agreements remains uncertain. The US Congress holds regulatory power over foreign trade, while current tariffs have been imposed under emergency powers. Consequently, enforcement may involve the implementation of additional tariffs if countries fail to adhere to agreed terms.