Advertisement

Opinion | Trump tariffs 2.0 will make Asian manufacturing great

The prospect of sweeping tariffs should drive an evolution towards a ‘China+n’ model, with more Asian countries moving up the value chain

Reading Time:3 minutes
Why you can trust SCMP
3
People shop at a Uniqlo store in New York on October 30. The Japanese operator of the clothing chain outsources production to countries including China, Vietnam, Bangladesh, Indonesia and India. Photo: TNS

Amid the uncertainty surrounding US foreign policy as Donald Trump returns to the White House, one thing is certain: higher tariffs will be a cornerstone of his foreign, economic and fiscal policies.

Advertisement
Not only China, but Mexico and other countries which enjoy high trade surpluses with the United States could also be on the receiving end. Trump might also leverage the threat of tariffs to coerce compliance from other nations. The tariffs collected, as a consumption tax, may partly offset the revenue loss of his promised tax cuts.
With the likely reappointment of Robert Lighthizer, who championed Trump’s “America first” stance on trade, the stage is set for an escalation of protectionism in the second Trump term.

However, this very assault on globalisation may have the paradoxical effect of helping it evolve into a more geographically distributed configuration – underpinned by integrated supply chains across broader Asia. Rather than revive US manufacturing as intended, Trump’s disruptive policies could propel a shift towards multimodal production networks in the Global South. This counterintuitive outcome exposes the limitations of a unilateral approach to redirecting trade flows in our interdependent global economy.

While tariffs defy economic principles, the US’ persistent trade deficits – driven by its structurally low savings rate – will merely shift among trading partners rather than disappear.

Advertisement

As tariffs push production away from the surplus countries, manufacturing will migrate to the next tier of competitive economies across Asia. This economic reality means Trump’s protectionist measures may accelerate Asia’s industrial transformation rather than revive US manufacturing.

Advertisement