In a world of higher tariffs, Asia must leverage its trade agreements

Global trade is set to take a hit, but deglobalisation doesn't have to be every country's destiny.

- Vikram Khanna

After the Trump administration takes charge in Washington in January 2025, we are likely to see US tariffs imposed on the rest of the world: 60 per cent on China, as per President-elect Donald Trump's campaign pledges, and at least 10 per cent on other countries.

This means the rest of the world has to inoculate itself against the impact of the tariffs. If they materialize, global trade will take a hit. The US is, after all, the world's biggest economy and importer, accounting for around 15 per cent of world imports.

Bloomberg estimates that 20 per cent of all goods traded globally either go to the US or come from there.

Assuming US tariffs of 60 per cent on all goods from China, 20 per cent on the rest of the world, and some retaliation, it reckons that the proportion of goods traded with the US will fall to 9 per cent. But it points out that most countries will be able to replace some of the market they lose in the US as well as some of what they buy from it by exporting to, and importing from, one another.

Given that China will face significantly higher tariffs than other countries, some US imports from China will be sourced from elsewhere, mainly South-east Asia and Mexico. But trade between non-US countries will increase by around 5 per cent, according to Bloomberg. It estimates that overall, world trade would go down by 7.5 per cent.

Despite this, there will be some beneficiaries from the diversion of trade from China, which is likely to be hit by the highest tariffs. The garment exporters of Bangladesh, for example, will benefit by becoming more competitive than their Chinese counterparts in a post-tariff world.

Vietnam may also benefit in certain product categories which can be substituted for Chinese-made goods. But overall, tariffs will hurt most countries, especially export-oriented economies like Singapore and others in South-east Asia because most of their exports to the US will be rendered less competitive.