Peter Navarro — US President Donald Trump's senior counsellor for trade and manufacturing — said after news broke that Vietnam was offering to cut its import tariffs on the US to zero: "If... they lowered our tariffs to zero, we'd still run about US$120 billion trade deficit with Vietnam... And the problem is all of the non-tariff cheating that they do."
“These comments add to a body of evidence painting a picture of a difficult road forward for any trade negotiations between Emerging Asia and the US,” says Barclays in an April 7 update.
“Relative to the March [forecasts]... we have reduced the simple average of 2025 GDP growth forecasts across the major Emerging Asian economies by 0.2 percentage points (ppt), to 3.3%; for 2026, the downgrade is larger at 0.4 ppt, to 3.2%. Risks remain tilted towards deeper GDP growth forecast cuts and more aggressive monetary policy easing,” Barclays says.
On April 2, Trump announced a universal 10% tariff on all imports into the US as well as reciprocal tariffs across dozens of trade partners. The tariffs excluded semiconductors, pharmaceuticals, copper and lumber, which are all likely to be assigned their own tariff rates globally in the future.
The reciprocal measures also do not include tariffs already announced on steel, aluminum, autos and auto parts.
The universal tariff was effective on April 5, while the reciprocal tariffs are set to be effective on April 9.
See also: Liberation Day takes US tariff to rate last seen in 1909
Not rocket science
While the tariffs are being called “reciprocal”, which implies that they are set based on levelling the playing field against unfair tariffs from other countries, the reality is that the formula used was based on a goal of eliminating trade deficits, notes Ronald Temple, chief market strategist at Lazard.
The US Trade Representative’s office confirmed that each country’s tariff was calculated by dividing the US trade deficit with the country by the total exports to the United States from that country and then dividing that number by two, hardly rocket science. Some strategists and economists have termed this as economics illiteracy.
See also: Tariffs: Liberté, réciprocité, calamité says Barclays
In retaliation, China announced a 34% tariff on US imports on April 4. “[Although] counterparts like the European Union are imposing countermeasures, I expect that there will also be simultaneous efforts to reduce tensions by offering concessions such as increased imports of US liquefied natural gas, and depending on the country, potentially defense equipment or other American commodities,” Temple adds.
Shooting itself in the foot
Since April 2, the Japanese yen has strengthened against the US dollar. “It’s possible the weaker dollar is reflecting that when you add the cumulative damage done by tariffs across all trading partners, the US economy will be more impacted than most others,” says David Chao, global market strategist, Asia Pacific (ex-Japan) at Invesco.
Economically, the weighted average tariff on US goods imports has increased from just under 3% at the end of 2024 to approximately 22.5%, according to The Budget Lab at Yale University.
As a simple rule of thumb, every 100 basis points (bps) increase in the weighted average tariff translates to about 10 bps of additional US core inflation which implies that the tariff increases to date could lead to a nearly 2 ppt increase in core inflation later in 2025, holding all other factors constant.
Undoubtedly, this impacts US households the most.
“Tariffs are a regressive tax, especially in the short-run. This means that tariffs burden households at the bottom of the income ladder more than those at the top as a share of income,” The Budget Lab says.
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According to The Budget Lab, the percent change in disposable income resulting from the April 2 tariffs on their own is 2.6 times as much for households in the second decile by income as it is for households in the top decile, of -2.3% versus -0.9%.
“As a result of these large tariff hikes, I now expect the economic damage to be more severe than would have been the case in a gradual escalation,” Temple says.
OCBC Credit Research notes that yield premiums on global junk corporate bonds reached their highest level since November 2023, following Trump’s tariff announcements, which raised concerns about potential corporate defaults and economic stagnation.
“In the last two days of the week (April 1-4), spreads on Asian junk bonds widened less than half as much as those in the US, as investors believe that Asian issuers are less directly affected by US tariffs, though they remain susceptible to broader sentiment shifts and secondary impacts.”
No retaliation from Asean
Within Asean, to date, Singapore has said it will not retaliate despite having the option to do so under its free trade agreement.
Malaysia, which currently chairs Asean, has likewise opted not to retaliate and has called for a collective response from the regional bloc
Vietnam has offered to cut its import tariffs on the US to zero. Indonesian President Prabowo Subianto has also instructed his cabinet to look into reducing trade barriers to the US.
India has also emphasised that it will not retaliate and will remain focused on its negotiations for a bilateral trade agreement with the US.
China's economy stabilises but pitfalls ahea
An editorial in the People’s Daily reiterates the Chinese government’s policies to increase its fiscal deficit to 4%, boost domestic consumption, support the implementation of special treasury bonds, provide the flexibility to lower banks’ required reserve ratio coupled with efforts to boost mainland stock markets.
Bank of America expects China's 1Q2025 GDP growth to remain at 5.2% y-o-y. However, fixed asset investment growth may slow.
On the other hand, retail sales may rise on auto sales.
On the whole, China still needs to emerge from a mild deflationary cycle, says Bank of America. "We estimate that March CPI inflation to come in at -0.1% y-o-y, with a drop in sequential terms. Sequential food prices likely fell, as both vegetable and pork prices prices dropped, while non-food price inflation may be dragged by oil price. Meanwhile, PPI deflation likely persisted at -2.3% y-o-y in March along with a sequential decline led by weak energy prices."
'Only the Fed can save us'
What’s next? Ross Gerber, co-founder and CEO of Gerber Kawasaki Wealth and Investment Management, who was an early backer of Tesla, and whose fund still holds 262,352 Tesla shares, says the administration’s Secretary of Commerce Howard Lutnick is using a 20th-century thought process in the 21st century.
“To get people to go back to factories when Americans don’t want to come back to the office to work means he’s not been in touch with his employees in his own office,” Gerber told CNBC, in reference to Lutnick as chairman of Cantor Fitzgerald till February, when he was appointed Secretary of Commerce. “Only the Fed can save us,” Gerber adds.
The 10-year US treasury yield has fallen drastically to 3.9%, leading market watchers to wonder if the best option to ride out the volatility is to opt for high-quality investment-grade bonds (A and above).
For retail investors, these would include the Astrea bonds, and other Singapore-listed retail bonds: Astrea VI, Astrea 7A, Astrea 8A, Frasers Property and Temasek; or Singapore-focused S-REITs, such as Frasers Centrepoint Trust and CapitaLand Integrated Commercial Trust
