Trump’s new tariffs target China but also threaten other Asian economies with large US trade surpluses. Reciprocal tariffs and non-tariff barriers put India, Thailand, and others at risk, while sectoral tariffs impact key industries like semiconductors and steel.
With US President Donald Trump pressing ahead with 25% tariffs on Canada and Mexico, along with an additional 10% tariff on China, Nomura highlighted that China is central to Trump’s America First Trade Policy (AFTP), but the rest of Asia is also at risk. AFTP focuses on trade imbalances, reciprocal and sectoral tariffs, and punitive measures on third countries that enable tariff circumvention. “Asia is in the line of fire,” Nomura stated.
Asia maintains a significant trade surplus with the US, with seven of the top 11 countries contributing to the US trade deficit being from the region. These include China (#1), Vietnam (#3), Taiwan (#6), Japan (#7), South Korea (#8), India (#10), and Thailand (#11). Vietnam, in particular, is heavily reliant on the US market, with its exports to the US making up a quarter of its GDP.
Nomura’s analysis pointed out that other Asian economies vulnerable to higher US tariffs include Taiwan (6.3% of GDP in value-added US exports, primarily in electronics), Thailand (5.6% in electronics, wood products, agricultural products, and machinery), Malaysia (4.6% in electronics and machinery), Singapore (4.5% in electronics and pharmaceuticals), and South Korea (4.5% in motor vehicles, electronics, and machinery).
Tariff decisions and impacted sectors
Trump’s reciprocal tariffs will be determined based on factors such as tariff gaps, VAT, and non-tariff barriers. Emerging Asian economies like India and Thailand impose relatively higher tariffs on US exports, particularly in agriculture and transportation. “Broadening the criteria to include non-tariff barriers increases the likelihood of the imposition of a reciprocal tax across a broader swath of emerging and developed Asian economies,” Nomura noted.
Non-tariff barriers are harder to quantify, covering areas such as import policies, sanitary and phytosanitary measures, technical trade barriers, export subsidies, and intellectual property regulations. A 2024 USTR report identified China, India, Indonesia, the Philippines, Taiwan, and Thailand as having high non-tariff barriers.
“To objectively quantify non-tariff barriers, we use the WTO’s Integrated Trade Intelligence Portal. This shows China and India as having the highest non-tariff barriers in Asia, with both countries using antidumping measures as a retaliatory tool,” said Sonal Varma, Chief Economist – Asia ex-Japan and India, Nomura.
Developed Asian economies like Japan, South Korea, and Taiwan have also imposed non-tariff barriers through sanitary and phytosanitary regulations. Singapore, which runs a trade deficit with the US and has relatively low trade and non-trade barriers, appears least vulnerable to reciprocal tariffs. “Determination of the reciprocal tariff was hard enough using just tariffs. Broadening the criteria to include non-tariff barriers makes the process more complex and less transparent,” Varma added.
Industries at risk from sectoral tariffs
Trump’s proposed tariffs target semiconductors, pharmaceuticals, steel, aluminium, lumber, and potentially copper. Nomura’s analysis found that 20.6% of Asia’s exports to the US are at risk, with over a quarter of US-bound exports from Korea, Japan, Malaysia, the Philippines, and Taiwan potentially affected. “By sector, Asia is most exposed to tariffs on autos, followed by semiconductors and steel,” Varma stated.
Trump has also threatened to impose tariffs on chips, though it remains uncertain whether this is a negotiation tactic aimed at encouraging more investment in the US by Asian semiconductor firms. Given Asia’s role across various stages of the semiconductor value chain, this threat is significant. “Given the presence of Asian economies across different stages of the semiconductor value chain, and the central role chips and electronics play in Asia’s growth, Trump’s threat cannot be ignored,” the Nomura report emphasized.
However, implementing tariffs on chips is challenging due to the complexity of the supply chain, which is spread across multiple countries. “Our deep dive shows that the direct impact of higher chip tariffs on Asia will likely be modest, given limited scope for substitution in the US, but indirect effects are a bigger concern, as a slowdown in US consumer demand would impact Asian economies that are present across different stages of the electronics supply chain,” Nomura elaborated. Taiwan is the most exposed, followed by Malaysia, Singapore, Korea, Thailand, and Vietnam. In 2023, the US imported US$ 80 billion worth of chips from Asia, accounting for 82% of its total chip imports.
Many Asian policymakers are taking steps to prepare for potential future US trade actions. This includes increasing investments in and imports from the US, lowering tariffs on US goods, strengthening alliances outside the US, mitigating third-country risks, and positioning themselves to benefit from the next wave of supply chain shifts, Nomura concluded.
