Vietnam Will be the Biggest Loser from Trump’s Tariff Barrage

Worse than promised and feared, Trump 2.0 has slapped the world's steepest tariffs on Asia, with the highest being on China at 54% (20% from existing duties and 34% in new "reciprocal" rates), while Cambodia, Laos, Vietnam, Myanmar, Sri Lanka, Bangladesh, Thailand, Taiwan and Indonesia all face fees above 30%. There were some sectoral exemptions, including commodities, pharmaceuticals, semiconductors, and energy.There are three key questions on these tariffs:1.    Are they maximalist positions and what can countries do to "negotiate" them lower?2.    What will be the short-term direct and indirect impact, assuming they will stay at the announced levels?3.    What actions can Asian countries take to mitigate this impact in the short term and longer term?The obvious targeting of developing Asia, particularly the poorest countries in the region, suggests this is not about reciprocal trade, but rather trade imbalances with the U.S. This makes it very difficult for Asian nations, particularly the poorer ones, to meet U.S. demand to reduce tariffs in the short term as the benchmark is buying more American goods than they export to the U.S.Given that U.S. goods are much more expensive, and the purchasing power is lower for countries targeted with the highest levels of tariffs, this option is not optimal. Vietnam, for example, stands out in having the fourth-largest trade surplus with the U.S., and has already lowered tariffs vis-a-vis the America ahead of the announcement -- without any reprieve. Vietnam can try to buy more Boeings and Lockheed Martin goods, but the asymmetric nature of U.S. and Vietnam's purchasing power makes it difficult for Vietnam to lower tariffs using the trade balance as a benchmark.What about the idea of putting to bed accusations over the rerouting of Chinese goods? This will be very difficult for Asian countries to do as they must first define what "rerouting" is -- as in whether it is pure transshipments or whether it includes imports of Chinese intermediates.