Shandre Mugan Thangavelu
Professor, Head, Jeffrey Cheah Institute for Southeast Asia, Sunway University.
Christopher Findlay
Honorary Professor, Australian National University.
1. Introduction
The reciprocal tariffs announced by the Trump Administration on 2 April 2025 on its key trading partners including ASEAN, Australia, China, India, Korea, Japan, and New Zealand have devasting impact on East Asia and the global economy.
All trading partners, excluding China, were imposed with a 10% universal tariff, which came into effect on 5 April 2025. Additional tariffs were imposed for some economies.
For ASEAN countries, the average US tariff is 36%. A 90-day pause on further increases above the 10 percent common baseline was announced on April 9, 2025: this pause does not apply to China. ASEAN economies have committed not to retaliate.
The US raised tariffs on Chinese imports from 34% on April 2, 2025, to 145% by April 11, 2025. China responded by increasing tariffs on US imports from 34% on April 4 to 125% on April 11. These steep hikes mark a rapid escalation in the trade conflict between the two countries.
The US and China have recently agreed to reduce most of their recently imposed tariffs for 90 days while negotiations continue. The US is lowering its main tariff on Chinese imports from 145% to 30%, while China is cutting its tariffs on US goods from 125% to 10%, and both sides are suspending or removing additional tariffs and non-tariff measures introduced since early April 2025
Similarly, the European Union (EU) announced a reciprocal tariff of 25% on the US, which was on suspension under the 90-day pause announced by the US.
Meanwhile, in May 2025 the US and the UK adopted a limited trade deal that lowers US tariffs on British car imports from 27.5% to 10% for up to 100,000 vehicles annually, eliminates US tariffs on UK steel and aluminium, and grants greater UK access for US agricultural exports like beef and ethanol, while the UK reduces its average tariff on US goods from 5.1% to 1.8%. However, the US maintains a broad 10% baseline tariff on most UK goods, and many issues-including digital trade and full tariff removal-remain unresolved as negotiations continue
Overall, the US reciprocal tariff is expected to have a serious impact on the global economy with a crush of the US and global stock markets with several trillion in losses and slower global growth. The reciprocal tariff will create greater volatility, global uncertainty and risk. The global economy is at the brink of global recession in the ‘tit-for-tat’ game leading to a ‘Prisoner’s Dilemma’ outcome of global recession, where both parties, which are such large economies, will inflict significant losses on each other and on the rest of the world.
The rise in negative attitudes and political tensions between the US and China is likely to harm their relationship and the global economy for years to come. This tension increases political risk and uncertainty worldwide. The new tariffs both countries have imposed on each other will directly raise prices for consumers, causing inflation and making everyday goods more expensive. As a result, households in both countries will feel the impact through higher costs and reduced wealth, which will further worsen public opinion about each other's products and policies
2. Role of ASEAN is Critical
ASEAN Economic Ministers met in February 2025. They agreed not to retaliate against steep tariffs imposed by the newly re-elected Trump administration, instead emphasizing dialogue and engagement with the United States to resolve trade tensions. The ministers expressed serious concern over the potential disruption to regional supply chains and livelihoods but reaffirmed their commitment to a rules-based multilateral trading system, supporting the use of the World Trade Organization for dispute resolution. ASEAN also began coordinating regional strategies-such as upgrading trade agreements and exploring tariff-free zones-to mitigate the impact, while some member states pursued bilateral talks with the U.S. for possible relief. It established the ASEAN Geoeconomic Task Force to monitor the situation.
Then on 10 April Ministers met again, following the US actions of ‘Liberation Day’. The Joint Statement from that meeting sought a common intention and constructive dialogue with the US under the ASEAN-US Trade and Investment Framework Agreement (TIFA) and Expanded Economic Engagement (E3) workplan. The Joint Statement is seeking a mutually beneficial outcome via economic cooperation in high value-added sectors, knowledge-based industries, digital services agricultural exports, green exports and technology, renewable energy, advanced manufacturing and electronics, garment and footwear, travel goods, healthcare and biotechnology, and transport products and equipment.
ASEAN can now also play an additional and crucial leadership role in a series of platforms in the region where these options can be explored, a consequence of the central role that ASEAN has played to date. The Joint Statement of the April meeting reiterates the commitment to existing ASEAN agreements, but also to the dialogues with its partners. ASEAN’s position of centrality, now of even greater value, creates the scope for it to take on a leadership role with respect to the multilateral system.
First, ASEAN has key platforms for economic cooperation with China under the ASEAN-China Free Trade Agreement (ACFTA) and Regional Comprehensive Economic Partnership (RCEP). There are also opportunities for bilateral dialogue, as occurred the Chinese Premier Xi Jinping visits to Vietnam from 14-15 April, and then to Malaysia and Cambodia from 15-18 April 2025. Outcomes included not only signing many trade agreements, but also the expressions of commitment to the rules-based trading system.
Second, ASEAN is at the heart of the East Asian Summit. The grouping comprising ASEAN member states as well as Australia, China, India, Japan, New Zealand, South Korea, which was further expanded in 2011 to include the Russian Federation and the US, is highly relevant. It intends to promote economic and political stability in the East Asian region by providing a forum for strategic dialogue and cooperation on economic, political, and security issues in the region. The EAS is also a platform to bring the EU as a strategic partner for discussion, since the EU is invited as an observer.
Third, ASEAN has the platform to create a broader and mutually beneficial dialogue with key global and regional partners through the ASEAN+1 FTAs with Australia, India, Japan, South Korea, and New Zealand. The set of ASEAN+1 FTAs makes up a critical platform enabling broader framework and discussion with key trading partners of the ASEAN and US, thus allowing for a constructive discussion on US reciprocal tariffs and global trade as well as seeking a more common ground for mutual benefits of the US and the region.
Fourth, ASEAN members play lead roles in the APEC process. Several ASEAN countries of Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam are also key members of APEC and hence they have a key role to play in the APEC process. The ASEAN Secretariat is an official observer. APEC Ministers responsible for Trade are scheduled to meet on 15-16 May 2025. That provides another opportunity to explore soft-landing outcomes via a coordinated position among ASEAN members.
3. Talking points
But what might be the talking points in these various dialogues?
The experience of unilateral discriminatory action by the US, and the analysis of the potential outcomes, and the discriminatory deals already done among big economies all make the point about the value of the rules-based system for smaller economies. This value is often recounted (as done in the Joint Statement of 10 April) but the current context adds to the value of doing something extra to demonstrate the commitment to those rules.
Regional economies are questioning the nature of their long-term relationship with the US, and its reliability with respect to its trade agreements. However, at the same time, the US’ significant role in the financial and trading systems, including the role of the dollar and the provision of associated financial services that support the trading system, and its role in regional security, does not suggest the construction of a new system of trade and finance, but rather a process of adjustment. It means working with the tools at hand.
Another reasons for focussing on institutions and policies within ASEAN influence is that any negotiation with the US will be difficult. The Administration has many objectives (structural change, trade flow rebalancing, revenue raising and others) which are contradictory. Tariffs are the main instrument in place at present, but they are mostly a flawed tool. It is not clear then how to propose an outcome with the US which is likely to be both acceptable and effective.
The immediate key tasks therefore are to support the existing institutions, keep markets open both in the region and in the rest of the world, to continue to capture and demonstrate benefits from economic integration and to facilitate adjustment to the US shock. As the Joint Statement of 10 April observes, effort in the WTO is also worthwhile, but the immediate focus is within the region.
4. Key Opportunities in RCEP
With a focus on open markets, there are several areas for attention, including making more progress in existing trade agreements, RCEP in particular, as well as extending the coverage of those agreements in terms of both membership and topics.
For example, there is an urgent need to sharpen the committed framework of the RCEP. It is a ‘living’ agreement, and it can address a bolder agenda that could mutually benefit the RCEP members of ASEAN and plus countries of Australia, China, Japan, South Korea, and New Zealand. Such a large group is well placed to explore the drivers of next stages of growth in the region, build a more compatible and intense trading area, providing more resilience in the regional value chains in goods and in services.
The scope of membership of existing agreements to widen their coverage to new markets is an important topic. ASEAN under the RCEP can invite more accession to RCEP, and in particular promote a discussion on the accession of India. It could also consider the accession of the other countries to join the RCEP. It can fast track the discussions and negotiations on ASEAN-EU FTA.
Another item on the agenda is the topic coverage of RCEP. This includes work to facilitate and accelerate the structural transformation towards the green economy, drive the use of smart digital technologies, upgrade critical skills in the region and promote regulatory alignment. This effort could include a focus on the design of a new framework for the facilitation of digital trade in the region, which is highly relevant given the rapid growth of trade in digitally deliverable services. In that context, there is an urgent need to finalise the design and operations of the RCEP Secretariat, which will play a vital role in both agenda setting in the RCEP and the development of capacity in member economies to participate in and benefit from the agreement.
Further, the ASEAN members within the RCEP could at least share their experiences of the social impacts of US reciprocal tariffs and articulate the priorities in economic cooperation (including with the +1 economies) in terms of aid and technical support. Such discussion can enable ASEAN and other economies to revisit the priorities for future work in their trade agreements.
5. Conclusion
The best response to the US shock is to focus on drivers of competitiveness and productivity growth. In the Asia-Pacific region, which appreciates the value of integration, and understands the role of cross-border value chains, then forward-looking FTAs can contribute. But they must address the 21st Century issues such as those related to barriers to digital transformation and cross border trade, impediments to skills development and movement of people, and to the green economy. Progress demands strong leadership from within the region, to articulate why and how this can be done. ASEAN can provide that, given the scope of its membership, its credibility, its interests and capacities, and the institutional tools which it has at hand.