The current US administration, whether mistakenly or not, views April 2 as its so-called "liberation day". To the rest of the world it marks the beginning of the tariff warws and has echoes of the 1930s, with the Smoot-Hawley Act under Herbert Hoover and we know how that turned out.
Three large Asian economies, Vietnam, India and China are in the US administration's cross-hairs, although India appeared to have got off with only a graze.
Vietnam is one of the worst-hit countries with a proposed 46% tariff, second-highest in Asean. The US announced a high 46% tariff on Vietnam, second-highest in Asean after Cambodia (49%). According to the US, Vietnam currently imposes 90% tariffs (including currency manipulation and trade barriers) on US imports. And, according to Reuters, the US deficit with Vietnam surged 18% y-o-y to US$123.5 billion in 2024.
“The proposed tariffs are the ceiling and will likely decrease as countries negotiate bilateral deals. Among stocks in our coverage, there could be more direct negative implications for Vietnam Dairy Products and Joint Stock Commercial Bank for Investment and Development of Vietnam,” Jefferies says, somewhat hopefully.
A blanket tariff means virtually all Vietnamese exports to the US will be impacted. Key product categories to highlight include electronics and electrical machinery (smartphones, computers, semiconductors and electrical equipment), Vietnam's single-largest export category to the US (~30% in 2024), Jefferies says. This would likely impact major tech manufacturers like Samsung and Intel, who operate large production hubs in Vietnam.
Vietnam is the second-largest supplier of clothing and shoes to the US market, after China. The US imported more than US$15 billion in textiles and garments from Vietnam in 2024 with Nike producing around 50% of its footwear and 30% of its apparel in Vietnam. Undoubtedly other sports brands such as Adidas would be affected.
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“Higher tariffs versus Asean peers (Philippines 17%, Malaysia 24%, Indonesia 32%, Thailand 36%) could undercut Vietnam's competitive advantages and reduce future FDI as companies diversify towards other Asean countries,” Jefferies says.
Jefferies’ Chief Washington Strategist, Aniket Shah, sees Trump's proposed tariffs as the ceiling, and believes tariffs will likely decrease as countries negotiate bilateral deals, helping the equity market rebound.
As a case in point, on March 31, the Vietnamese authorities were reported to have offered to cut import duties on a range of goods from the US, including cars, liquefied gas and some agricultural products, and it could even allow SpaceX to launch its Starlink satellite internet services.
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India breathes sigh of relief
While the headline 27% reciprocal tariff on India appears high, it is lower than other emerging market counterparts in Asia-Pacific. India's goods trade surplus with the US was US$46 billion 2024 (1.2% of GDP) with US being India's top goods exports destination (18% share).
Key pharmaceutical exports have been exempted for the time being, which is a positive. Auto & auto components have already seen a hit. India's software exports to US are also large (US$103 billion in FY2024) but there's no tariff impact here, says Jefferies.
China’s tariff shock
The US administration announced 34% additional tariffs on China, on top of the 20% tariff hikes in Feb-Mar. This brings the US weighted tariff rate on China to 65%, one of the highest in the world. Besides the direct tariff shock on China's exports to the US, the indirect impact would also be notable, as US' pervasive tariff hikes on other trading partners would slow global trade.
Many market watchers reckon that the Chinese government has the policy tools to launch a meaningful stimulus for the economy.
Morgan Stanley says: “Beijing will likely accelerate implementation of the previously announced RMB2 trillion stimulus package in the National People’s Congress. Should growth (and more importantly, social dynamics) deteriorate rapidly, it could trigger additional policy support in the coming months, such as national fertility support and expansion in consumer goods trade-in programme.”
