Best deal with US tariff policy is no deal

ByLili Yan Ing

[Photo by Li Min/China Daily]

Given that global economic uncertainty loomed large over the just-concluded 46th ASEAN Summit, the most strategic response to US President Donald Trump's tariff-driven foreign policy is disengagement, not negotiation or appeasement. Ignoring Trump is not passivity; it is strategic defiance. By refusing to be drawn into asymmetrical negotiations, the Association of Southeast Asian Nations can better safeguard its interests and let the US economy foot the bill for the protectionism it has unleashed on the world.

Trump's accusation that China, Japan, the Republic of Korea, India and ASEAN member states are "job thieves" is a distortion of economic reality. From 2021 to 2024, US unemployment averaged just 3.8 percent — among the lowest in the developed world — exposing the falsehood that Asian economies are stealing US jobs. In fact, the US economy grew to a record $29.3 trillion last year, retaining its position as the world's largest economy.

Structurally, 81 percent of the US' GDP stems from services, a sector that employs 79 percent of the US workforce (91 percent if the self-employed are included). Manufacturing, though politically resonant, accounts for only a small percentage of the US workforce. By imposing tariffs, particularly on imports from Asian countries, under the guise of "saving jobs", Trump is distorting reality and harming the very global networks that power US economic growth.

For decades, ASEAN has contributed significantly to US prosperity. In goods, ASEAN's supply of semiconductors and machinery is critical to sustaining the US' manufacturing competitiveness, while ASEAN members' demand for US aircraft and defense equipment supports thousands of high-skilled jobs in the US. Also, ASEAN economies are a major destination of US service exports including finance, education and digital platforms, contributing significantly to the US' trade surplus. In 2024, the US had a $24.4 billion surplus against ASEAN in services.

Trump's punitive tariffs risk unraveling this mutually beneficial relationship. Punitive tariffs risk alienating a multi-billion-dollar trade partner, disrupting supply chains and weakening the US' economic prospects. For over five decades, ASEAN has been supplying essential intermediate goods, absorbing US service exports, and generating trillions of dollars in annual revenue for US companies operating throughout the region.

How, then, should ASEAN respond to Trump's destructive approach?

First, ASEAN should not reward Trump, by according the US preferential treatment, for exploiting the imbalance in goods trade to justify the tariffs. Disengagement from Trump's US would be a reaffirmation of ASEAN's core values: non-alignment, multilateralism and mutual respect.

By adhering to the WTO's principles of reciprocity and "most favored nation" treatment, ASEAN has rejected Trump's zero-sum, discriminatory trade practices, reaffirming the principles enumerated in the ASEAN Leaders' Statement of May 26-27. ASEAN must also partner with other regional blocs to uphold these rules. In an era of growing economic fragmentation, ASEAN has become one of the few remaining anchors of rules-based global trade.

Second, ASEAN should make efforts to mobilize the US business community, whose long-term interests lie in open, stable markets. US businesses have made huge profits from ASEAN's openness. It's time they defended the very conditions that made possible their success.

From Boeing to Apple, Microsoft, IBM and Intel; from Freeport, Exxon-Mobil and Chevron to platforms like Starlink; and from global consumer names like McDonald's, Coca-Cola and Nike to US banks like Citibank, and Visa and MasterCard; from insurers AIG and Chubb to law firms Skadden and Baker McKenzie and consultancies like McKinsey and BCG, they have all flourished due to China's open markets and regional cooperation.

Yet if influential corporations, such as Elon Musk's Tesla and Starlink or Meta, which owns Facebook and Instagram, align with Trump's nationalist agenda, ASEAN and other economies must take note. Those firms must use their influence in the US to counter economic nationalism. If they fail to speak up — or worse, remain complicit — ASEAN would be right to reconsider the privileged access they enjoy in its markets.

ASEAN should make clear to the US that market access is not a blank check, because a partnership of any kind must be reciprocal. If US firms benefit from ASEAN's openness but fail to defend the frameworks that enable their success, ASEAN has every right to reassess their privileged access.

And third, ASEAN should let the US deal with the consequences of its own policies. Trump has made clear — by imposing sweeping tariffs on imports from its trade partners and resorting to nationalist rhetoric — that he has little regard for ASEAN or the long-standing US allies such as the European Union, Canada, Japan and the ROK.

Trump responds neither to diplomacy nor to data, but only to two constituencies: his domestic political base and a narrow circle of business elites. So, if Trump slaps tariffs on goods from its trading partners, it will be US firms — those dependent on Southeast Asian supply chains — who will bear the consequences: higher costs, logistical delays and eroded competitiveness.

As trying to reason with Trump is a bad idea, ASEAN should invest in building economic resilience, deepen regional integration, diversify its trade partners, and expand its strategic partnerships. To move forward, the 46th ASEAN Summit in Kuala Lumpur offered a critical window to ASEAN to present a bold economic agenda. Hence, ASEAN should double down on intra-ASEAN trade, unleash the full potential of the ASEAN+1 Free Trade Agreements and the Regional Comprehensive Economic Partnership, strengthen ASEAN+3 by helping deepen China-Japan-ROK cooperation, and strengthen strategic ties with partners across the EU, the Middle East, Eurasia, Latin America and Africa.

Diversifying not only trade and investment but also currency use and payment systems is essential to building a more autonomous and future-ready ASEAN.

As Trump turns inward, ASEAN must turn outward.

The author is the secretary general of the International Economic Association.