US President Trump blinked in trade war with China. Can Southeast Asia get a break, too?

It took one weekend in Geneva for US President Donald Trump to roll back what has been seen till now as the raison d'etre of his presidency.

From May 14, gone are the 145 per cent tariffs on goods from China – down to 30 per cent, composed of 10 per cent baseline tariffs plus 20 per cent punitive levies aimed at curbing the inflow of precursors to make the synthetic opioid fentanyl, which is causing tens of thousands of deaths in the US.

Apart from these, some sector-specific tariffs remain.

The reversal on China invites the obvious question: What about the rest of the world, especially South-east Asia, where reciprocal tariffs range from 49 per cent on Cambodia to 17 per cent on the Philippines to 10 per cent on free trade agreement (FTA) partner Singapore?

A rare joint US-China statement on May 12, issued after two days of talks in Geneva, announced a dramatic lowering of tariffs while the US seeks "a long-lasting and durable trade deal" with China, to quote US Treasury Secretary Scott Bessent.

Also on May 14, Beijing will slash levies on American products from 125 per cent to 10 per cent.

The US decision to lower tariffs was largely seen as a victory for China. Many analysts said Mr Trump had blinked.

Dr Ian Bremmer, founder of political risk consultancy Eurasia Group, described it as Mr Trump's "biggest climbdown to date". Others said China had stared down Mr Trump's tariffs and called his bluff.

The Americans suddenly do not want to decouple any more, Dr Bremmer said. "Recognising they can't trade at all with the present 145 per cent tariffs, they reached out to China to start negotiations."

The Chinese had shown no signs of picking up the phone, he noted.

Less excitement and controversy greeted Mr Trump's first trade deal, struck with Britain on May 8. While the baseline 10 per cent tariffs on all goods entering the US remained, levies on some British exports, including cars, steel and aluminium, were reduced.

There are a few takeaways from the two deals that conceivably could apply to other negotiations, said former US deputy trade representative Wendy Cutler, who is now vice-president of the Asia Society Policy Institute.

"These deals are light on hard commitments and focus more on setting the stage for future talks," she said.

"They both suggest that the US is willing to be pragmatic and flexible. However, they cause little doubt that the 10 per cent universal tariff is here to stay," she told The Straits Times.

The two deals cut both ways for Asean states trying to understand Washington's stance, said Mr Gregory Poling, who directs the South-east Asia Programme at the Centre for Strategic and International Studies (CSIS).

"On the one hand, it shows that the administration is increasingly desperate to announce deals, even if they are temporary and lack substance," he told ST.

"But, on the other hand, there doesn't appear to be a plan, so it is unclear what exactly the White House wants."

That could be particularly vexing for a country like Singapore, he said, which already runs a trade deficit with the US and has virtually no trade barriers, courtesy of the two-decade-old FTA.

A trade expert closely following the ongoing negotiations between the White House and several Asean countries said there was not too much to take away.

"US industry reactions to the UK deal were not great. And the deal with China might make other governments think that China's retaliation to US tariffs was helpful," said the expert, who did not want to be named.

"While I assume other governments are watching the UK and China, it is hard to see if any lessons can be learnt," he said.

Negotiations are proceeding apace as the clock ticks for the first Asean country to strike a deal with the Trump administration.

Vietnam and Malaysia, which face 46 per cent and 24 per cent tariffs, respectively, appear especially galvanised.

At a May 5 special Malaysian Parliament sitting on tariffs, Prime Minister Anwar Ibrahim said strategic purchases from the US were under consideration. Malaysia Airlines, he said, could be expediting its procurement of the order placed in 2024 for 30 Boeing aircraft, with an option for 30 more.

Other deals could be on rare earths, abundantly found in Malaysia, which the US is keen to buy.

A natural gas deal could also be on the table, even though Malaysia is a net exporter of gas.

The country could buy US gas for domestic use and export more of its local production not only to the existing big buyer Japan, but also to China and South Korea.

Sources told ST that Malaysian Trade and Industry Minister Tengku Zafrul Aziz's delegation had returned buoyed after meetings in Washington with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer in late April.

Vietnam, which has been in Mr Trump's cross hairs for its enormous US$124 billion (S$161.6 billion) trade surplus with the US, has signalled willingness to make significant concessions. These include lowering tariffs on American goods and increasing US imports. It also wants to be recognised as a market economy by the US, which could be the basis for lower tariffs.

But progress has wobbled a little, said Mr Marc Mealy, executive vice-president and chief policy officer of the US-Asean Business Council in Washington.

"One of the proposals that the government of Vietnam put on the table, to help make the trade flows more balanced, was to negotiate a comprehensive bilateral free trade agreement between the two governments," Mr Mealy told ST.

"We understand that the US declined the idea of negotiating a bilateral FTA."

Vietnam, too, is inclined to make purchases of US products like Boeing planes and gas, and allow Starlink, owned by Mr Trump's close associate Elon Musk, to sell its satellite internet services.

A more sensitive purchase might be a possible deal to buy F-16 fighter jets – as many as 24, according to US media. But Hanoi would have to tread carefully, given that China would almost certainly see that as upsetting the strategic balance in the South China Sea.

On the other hand, this is exactly the kind of big-ticket item that would be required to make any sort of dent on the US-Vietnam trade imbalance.

The Philippines sent Mr Frederick Go, Special Assistant to the President for Investment and Economic Affairs, to meet Mr Greer on May 2. Talking points included the impact of tariffs on key Philippine exports like semiconductors, garments and coconut products.

With a US$4.8 billion trade surplus and strategic military ties in play, Manila is offering its own tariffs on American goods.

Mr Go described the talks as "very productive".

The pressure to choose

An obstacle in negotiations, according to American media reports, is that the White House is pushing for less Asean trade with China as the price for better trade terms with the US.

The office of Mr Greer did not respond to a request to comment on the matter.

But there is little doubt that Washington expects trade partners in Asean to cooperate with efforts to curb China's economic influence in a region heavily reliant on Chinese raw materials, components or intermediate goods.

In particular, the US is vocal about concerns that Chinese goods are being rerouted through Asean countries to bypass US tariffs on China.

Ms Cutler said the US would undoubtedly ask countries to strengthen their trans-shipment regimes and come down hard on circumvention activities.

"There may be other US requests trying to rein in the investments and exports by Chinese companies in their countries," she said.

"Trading partners will need to walk a fine line by being responsive to US requests but not going so far as to draw Beijing's ire."

Mr Mealy said Asean countries have been keen to offer assurances. Vietnam, for instance, has pledged to address the trans-shipment issue.

"Some Asean governments have sought to address this by implementing more stringent 'made in' certification requirements to protect their 'trusted trade partner' brands," Mr Mealy said.

"Others have also issued public policy statements rejecting investors seeking to circumvent established trade rules," he said.

The Malaysian trade delegation said it sensed that it was well understood by Washington.

"They know that even if they ask Malaysia to decouple from China, we can't. A lot of our economy is intermediate and we need to buy from everyone to manufacture stuff and then sell to everyone," said a top economic official, who cannot be named owing to the confidential nature of the trade talks.

And Malaysia has anticipated the Trump administration demands: namely, curbing relabelling, reducing the deficit, and inserting technological safeguards to make sure Malaysia does not use Chinese spying technology and sell it in products that end up in the US.

Mr Lutnick had indicated to Datuk Seri Zafrul that if Malaysian exports had inputs from China, these would be taxed.

"So, it is up to us to optimise our supply chain and ensure China content isn't sold to the US. Or, if it is, then it will be low enough that the margins make sense. Basically, business decisions," said another source who was privy to the talks.

Could the new pause in the US-China trade war presage an easing of pressure on Asean countries?

Mr Poling, the CSIS analyst, said the timeline was tricky.

"The pressure might ease for 90 days, but if talks fall apart, which is entirely possible, then the administration could lash out at anyone it perceives as deepening ties with China at the US' expense," he said.

"Because the 90-day pause on everyone else's tariffs runs out nearly a month and a half before the 90-day pause on China tariffs, countries presumably have to try and cut deals without any clarity on what will happen between Washington and Beijing."

In the meantime, a pushback against Mr Trump's tariffs is building up in Congress, where a House resolution seeking to claw back the authority to levy tariffs has been tabled. According to the Constitution, the Congress, and not the president, holds the purse strings.

"I don't think it is in our interest to put the South-east Asian nations in a position where they have to pick one or the other," US Representative Ami Bera, ranking member of the House Asean caucus, told ST.

He said he had discussed the issues in recently held meetings with Asean ambassadors and with American companies with investments in South-east Asia.

"The President is prioritising the Indo-Pacific – that is certainly a positive. The negatives are the uncertainty and not knowing what to expect. Our advice has been to give it some time, start negotiations and see where they go."

The push for an exclusive trade relationship comes equally from China.

While Asean's Jakarta-based ambassadors were on a tour of Shenzhen, Beijing and Hong Kong at China's invitation in April, a senior Chinese Foreign Ministry official urged Asean to join forces with China against US tariffs.

China will not dump goods in the region, he said, according to a South-east Asian diplomat familiar with the matter.

Asean diplomats listened silently, sceptical of China's promises.

One official noted that if Hong Kong, despite its advantages, has not thrived under Chinese support, Asean countries have little reason to trust Beijing's assurances.

That said, Asean countries are ready to take the next step in their FTA with China. They are expected to announce an upgrade to include a digital trade chapter during a meeting at the end of May.

In Washington, as the White House's self-imposed July 6 deadline to seal trade deals draws closer, Mr Trump has ruled out any extensions.

But in the Trump world, nothing is set in stone.

State of negotiations

Singapore

When talks were held: Last meetings were held on April 15, April 25 and May 8.

Which officials were involved: Deputy Prime Minister Gan Kim Yong held phone calls with US Trade Representative Jamieson Greer on April 15, Commerce Secretary Howard Lutnick on April 25 and Treasury Secretary Scott Bessent on May 8.

Talking points: Singapore aims to work with the US on "creative solutions" to boost trade relations, and is also negotiating concessions to facilitate the export of pharmaceuticals to the US.

Thailand

When talks were held: Scheduled meeting on April 23 was cancelled.

Which officials were involved: A Thai delegation led by the government's chief negotiator, Deputy Prime Minister and Finance Minister Pichai Chunhavajira, was to meet US officials in Washington.

Talking points:

• Talks stalled after the scheduled trip was cancelled.
• Prime Minister Paetongtarn Shinawatra said on May 4 that her government remained in informal contact with US trade officials, and that she was confident talks would take place before the 90-day pause on reciprocal tariffs lapses.

Indonesia

When talks were held: Last meeting was held on April 26.

Which officials were involved: Indonesia's negotiating team, led by Coordinating Minister for Economic Affairs Airlangga Hartarto, held talks with US Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent and National Economic Council director Kevin Hassett.

Talking points: Among the sticking points are a QR-based Indonesian payment system that has curbed online payments using Visa and Mastercard, a domestic policy requiring localisation of components used in information and communications technology goods manufactured in Indonesia, and a US demand for Indonesia to purchase more American petroleum products.

Philippines

When talks were held: Last meeting was held on May 2.

Which officials were involved: Philippine officials led by Mr Frederick Go, Special Assistant to the President for Investment and Economic Affairs, met US Trade Representative Jamieson Greer.

Talking points:

• The talking points included the impacts of tariffs on key Philippine exports like semiconductors, garments and coconut products.
• The Philippines has signalled openness to lowering tariffs on American goods.