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Trump’s Tariff War Unsettles The World – Analysis

The US President Donald Trump has created mayhem by his unconventional decisions and launching a massive tariff war, thereby disrupting the world trading system. There are serious questions if such an approach and policy shall help him in his Make American Great Again (MAGA) initiative. In all probability, contrary would be the case. Asia has emerged a major target of Trump’s tariff as he sent letters to 14 countries in Asia, including US allies, informing them higher import tariffs will come into effect on 1 August unless they reach a deal with the US. Key US allies Japan and South Korea would be hit with 25 per cent tariffs. Other countries including Indonesia, Bangladesh, Thailand, South Africa and Malaysia were slapped duties from 25 per cent to 40 per cent. While announcing levies on the 14 countries, Trump hinted for additional negotiations, while at the same time warning that any reprisal steps would be met with a like-for-like response. Interestingly, Singapore was not among the 14 countries to which Trump sent letters. Currently Singapore is subject to the baseline tariff rate of 10 per cent. In May 2025, the US offered to discuss concessions for Singapore on pharmaceutical exports, which make up 10 per cent of the country’s exports to the US. Pharmaceutical goods are currently exempt from the baseline tariff rate on imports to the US. Trump has hinted to review this too. Trump’s tariff war with the Asian countries is going to hit the domestic consumers as many items imported from Asia shall either vanish from the shelves or become prohibitively expensive. There is a growing Asian-American population. This segment of the US population is a ready-made customer base for Asian grocery. And, this is growing but would now receive a setback. Ethnic grocery stores and supermarkets in the US generated around $ 55 billion in revenue in 2024. Trump’s tariff threat now threatens to stem their growth. In particular, smaller players would be hit hard. There shall be a price escalation on most of the products sourced from Asia once tariffs kick in. The impact would be direct on the consumers. On Trump’s tariff threat, the Asian community has been stocking up on Asian goods buying rice, cereals, soya sauce etc. The question that arises is: how long such stocks shall last? Impact of Trump’s tariff threat on Vietnam                 During the recent BRIC summit in Brazil, Vietnamese Prime Minister Pham Ming Chinh and China’s Premier Li Qiang agreed to boost trade and investment ties between the two countries. Both Vietnam and China are communist countries with similar economic models. The initiative between the two prime ministers was triggered by Trump’s threats to BRICS grouping with an additional 10 per cent tariff if they adopt “anti-American” policies. Separately, Vietnam has struck a deal with the US, including lower-than-promised 20 per cent levies on Vietnamese goods. But trans-shipments from third countries through Vietnam will still face a 40 per cent levy as part of the trade deal. Details on the trans-shipment tariffs are yet to be made public, but analysts believe the clause is primarily aimed at components and materials originating from China and then labelled "Made in Vietnam" to skirt US tariffs. As regards India, Trump has said a mini trade deal is expected to be signed soon. That would be an interim one. In April, Trump announced a 26 per cent retaliatory tariff on Indian goods before pausing implementation pending negotiation. If the deal goes through, lower levies will put New Delhi in an advantageous position as manufacturing could move away from nearby countries with high tariffs like Cambodia, Indonesia and Bangladesh, and into India. Though New Delhi and Washington have been pushing to finalise the deal, disagreements over dairy and agriculture are sticking points. The agricultural sector employs half of India's workforce and contributes to about 18 per cent of the country's GDP. There are fears that if American farm produce starts flooding the Indian market, vulnerable local farming businesses may perish. Trump said on 8 July that the US would impose 25 per cent tariffs on Tunisia, Malaysia and Kazakhastan, 30 per cent on South Africa, Bosnia and Herzegovina, 32 per cent on Indonesia, 35 per cent on Serbia and Bangladesh, 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar. The higher tariffs take effect on August 1and notably will not combine with previously announced sector tariffs such as those on automobiles, steel and aluminium. Most countries have been under pressure to conclude deals with the US after Trump in April 1 unleashed a global trade war that has roiled financial markets and sent policymakers scrambling to protect their economies. The temporary reprieve was later extended till August 1, leaving room for negotiations. At times, Trump has remained inconsistent and seems firm on his decision to increase tariffs. He has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened. Bangladesh that was embroiled in domestic political turmoil in mid-2024 rushed a team to Washington to have trade talks with Washington. The US is the main export market for Bangladesh's readymade garments industry, which accounts for more than 80 per cent of its export earnings and employs 4 million people. No wonder, the president of Bangladesh Garment Manufacturers and Exporters Association Mahmud Hasan Khan expressed shock and fears that the increased tariffs would hurt the industry badly. Bangladesh has emerged as the world’s second-largest garment manufacturer. The 35 per cent tariffs on Bangladesh would badly hit the country’s textile sector. US companies that source products from Bangladesh range from Levi Strauss to VF Corp. whose brands include Vans, Timberland and The North Face. The office of the United States Trade Representative sent a second draft document for review. The new tariff is more than the 16 per cent already placed on cotton products. It is however, a two percentage point dip from the initial 37 per cent Trump had previously announced in April. The industry has already been hit hard by a student-led revolution that toppled the government in 2024.   Similarly, South African President Cyril Ramaphosa said the 30 per cent US tariff rate was unjustified, given that 77 per cent of US goods enter South Africa with no tariffs. China has until August 12 to reach a deal with the White House to prevent Trump from reinstating additional import curbs after Washington and Beijing agreed in June on a tariff framework. In the meantime, China warned the US against reinstating tariffs on its goods, and said it could retaliate against countries striking deals with the US to cut China out of supply chains.  As regards the European Union, Trump was rather circumspect and did not send a letter setting out higher tariffs. Though Trump had a “good exchange” with the EC President Ursula von der Leyen, it was not clear if there was a breakthrough in talks to stave off tariff hikes on the US’ largest trading partner. The EU was torn over whether to push for a quick and light trade deal or leverage its economic clout to negotiate a better outcome. Trump indicated that he could impose a 17 per cent tariff on EU food and agriculture exports. He also threatened leaders of developing nations in the BRICS group, who were meeting in Brazil, with an additional 10 per cent if they adopt “anti-American” policies. As regards Indonesia, it sent its top negotiator to Washington as it planned to increase its agricultural and energy imports from the US. Indonesia’s palm oil exports to the US may fall due to the threatened 32 per cent levies. Palm oil is among the country’s top exports to the US. If implemented, the tariff could lead to a 15 per cent to 20 per cent drop in palm oil shipments to the US. The competitiveness of palm oil will decline against other vegetable oils such as soybean oil and rapeseed oil, especially if countries exporting these vegetable oils receive lower tariffs. Indonesian palm oil products, which account for 85 per cent of US palm imports, may also lose market share to Malaysian palm oil, which faces a lower tariff. What does one read from Trump’s tariff war and his bargaining strategy since he has extended the timeline? In all probability, one can decipher that negotiations are likely not to have reached the White House’s desired outcome. The delays...