What will be the impact?
Since Trump first announced his trade plan in February, economists have said that higher tariffs could raise consumer prices and slow economic growth in the US.
These warnings continued after Wednesday’s announcement.
The tariffs raise concerns about inflation and growth risks, said JP Morgan Asset Management’s chief market strategist for Asia-Pacific Tai Hui.
Inflation could be impacted as the US struggles to increase manufacturing capacity and supply chains pass on costs to consumers, he said.
“US consumers may cut back on spending due to pricier imports, and businesses might delay capital expenditures amid uncertainty about the tariffs’ full impact and potential retaliation from trade partners,” he added.
Here in Southeast Asia, aside from the direct hit from higher tariffs, a second-order impact could come from slower growth in the region’s key trading partners – China and the US, DBS Group senior economists Chua Han Teng and Radhika Rao said in a March note.
On Wednesday, the banking group’s senior foreign exchange strategist Philip Wee added in a note that the reciprocal tariffs on emerging Asian economies were “notably high”.
This sends a message that the US is not just targeting China directly, “but also indirectly blocking the ‘China Plus One’ strategy many companies use to diversify supply chains to circumvent US tariffs”.
However, Mr Wee said Trump has also signalled his openness to negotiations by setting what the president called “discounted” reciprocal tariffs.
He referred to them as such because they are still lower than what the US calculates each trading partner has levied on American goods, when currency manipulation and trade barriers are factored in.
