The road is made by walking

Asian economies are still anxiously assessing how to compete for trade with the United States after missing the August 1 deadline for the Trump administration's tariff negotiations.

- ANDREW SHENG

The Philippines' tariff rate for exports to the US is reportedly down to 19 per cent. However, one Filipino lawmaker says it is 6 per cent. Indonesia's rate is down to 19 per cent; Vietnam's is down to 20 per cent. Hours before the deadline, Malaysian, Thai and Cambodian leaders seemed to be on the cusp of reaching deals with the US. Meanwhile, Laos is bracing for stiff tariffs of up to 40 per cent.

This is Maga economics in a nutshell. Washington has traded in a multilateral approach to hegemony for a "divide and conquer" strategy that makes smaller economies compete against each other for the superpower's favour. Against the largest importer in the world, small exporters have no cards, as Donald Trump might say.

As governments scramble to negotiate deals, businesses may have to close entire factories or shift to countries with lower tariffs. If current profit margins are too thin, higher tariff rates are likely to put further stress on the cost of doing business.

Vietnam, Cambodia and Bangladesh emerged as big winners from the first phase of the US-China trade war in the late 2010s. But Cambodia's tariff rate faced as much as 40 per cent, compared with Bangladesh's 35 per cent rate. On August 1, Trump basically equalized tariffs by putting Cambodia and Bangladesh at 19 per cent, versus Vietnam at 20 per cent.