Trump departs ASEAN with lingering questions for Southeast Asia’s trade

President Trump has left a meeting of Southeast Asia’s leaders, leaving Malaysia, but many questions remain about how the region will fare under his constantly changing trade strategies.

Trump visited Malaysia on Monday to attend the Association of Southeast Asian Nations’ (ASEAN) 47th Summit, where his main event was the signing of a ceasefire agreement between Thailand and Cambodia.

He met with ASEAN leaders to discuss US tariff rates, which range from 10% for Singapore to 40% for Myanmar and Laos, on the sidelines of the summit in Kuala Lumpur.

The White House announced framework agreements, which outline the terms of upcoming trade agreements with Thailand and Vietnam, with Malaysia and Cambodia, in the midst of a frenzy of activity.

While Trump’s most recent round of negotiations resulted in tariff exemptions for some of its key exports, many more important issues remain unanswered.

Will Trump follow through on his threats to impose a 40% tariff on “transshipments” and a 100 percent tariff on semiconductors, primarily referring to Chinese exports routed through third countries to avoid pre-existing tariffs, remains to be seen.

If Trump decides to start a transshipments ban, it’s unclear how the US might define the “country of origin” of goods that cross borders dozens of times before they are finished.

Despite the threat that a broadly applied tariff on goods with multiple countries of origin would pose to Southeast Asia’s highly integrated supply chains, none of the agreements signed on Sunday made mention of semiconductors, which are a crucial export for Malaysia, or specific country-of-origin regulations.

Additionally, there were no details about trade talks involving Indonesia and the Philippines, two of the biggest economies in the area.

All four nations agreed to the same US tariff rates that the White House had previously announced, 19 or 20%, as part of the agreements with Malaysia, Thailand, Cambodia, and Vietnam, making a number of concessions.

All four nations have pledged to lower non-tariff barriers to US trade, with Cambodia and Thailand promising to do so on a 100 and 99 percent of US imports, respectively.

Malaysia, Thailand, and Vietnam also agreed to purchase billions of dollars worth of US agricultural exports, US-made aircraft, and offer concessions on digital services, while Kuala Lumpur pledged to invest an additional $70 billion in US capital.

To support further US investment, Thailand and Malaysia signed separate memorandums of agreement to work together on supply chains of rare earths and other crucial minerals, including nickel and cobalt.

The US appears to be most benefited by the terms of the agreements, but they also offer some concessions to the area.

The most comprehensive agreement reached at the summit, which places a zero percent tariff on some of Malaysia’s key exports, including cocoa, rubber, and palm oil, is included in the agreement.

According to Jaideep Singh, an analyst at the Institute of Strategic &amp, International Studies in Kuala Lumpur, the majority of the language surrounding Malaysia’s lifting of trade barriers also refutes existing trade policies.

There is no additional regulatory burden on the Malaysian government, Singh told Al Jazeera, “for many of the commitments to reduce non-tariff barriers set out in the agreement.”

Malaysia also received “peace of mind” on tariffs, according to Priyanka Kishore, director and principal economist at Asia Decoded in Singapore.

Trump threatened Southeast Asia with some of the highest tariffs in the world in his “liberation day” announcement in April, before lowering the tariffs for the majority of nations to 20% or less.

In their ongoing negotiations with the Trump administration, Kishore said other ASEAN nations might benefit from the Malaysia-US agreement as they compete for lower tariffs or specific goods exemptions.

According to Kishore, “It’s very likely that Malaysia serves as a model for Vietnam, Thailand, and the rest of the world in terms of what they can look forward to.”

Trump’s tour of the area did not include tariffs applicable to certain industries, such as those affecting cars, aluminum, steel, and pharmaceuticals.

The most crucial remaining issue after Trump’s visit, according to Jayant Menon, senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, is how the agreements will be enforced.

Menon noted that while Trump has imposed tariffs by using emergency powers, the US Congress has the authority to regulate foreign trade, such as through free trade agreements.

Because these are not traditional free trade agreements, he told Al Jazeera, and neither the framework agreements nor the trade agreements being done have clear legal nuances.

Source: Aljazeera