Vietnam, Indonesia, and the Philippines have struck separate deals with the White House in recent weeks to significantly reduce the tariffs the US will levy on their exports, as the August 1 deadline looms.  

To access the market of the world's largest economy, all three Southeast Asian states have pledged to reduce their tariffs on US goods to nearly zero and increase their purchases of American products.

In some cases, this may negatively affect European exports to Southeast Asia. However, most analysts believe that zero tariffs for the US could work in Europe's favor by pressuring Southeast Asian states to also lower their tariffs on European goods.

On Sunday, Washington and Brussels reached their trade deal framework, with a US tariff on EU exports set at 15%, marking the end of a monthslong standoff between two of the world's largest economies.

Tariff deals for Philippines, Indonesia, Vietnam

On July 22, US President Donald Trump announced that a 19% tariff would be applied to goods from the Philippines, up from the 17% rate set in April, while Manila agreed to eliminate levies on US exports.

Philippine President Ferdinand Marcos Jr. said that his country would import more soy, wheat, pharmaceutical products, and cars from the US.

Days earlier, the US and Indonesia, Southeast Asia's biggest economy, struck a deal in which the US lowers the duties on Indonesian exports to 19%, down from a threatened 32%.

Jakarta also agreed to eliminate tariffs on almost all US goods and scrap all non-tariff barriers facing American firms, including recently introduced pre-shipment inspections on imported goods and local content requirements, which had prevented Indonesia-based companies from using certain imported products in their manufacturing processes.

According to Trump, Jakarta will also buy $15 billion (€12.9 billion) in US energy, $4.5 billion in American agricultural products, and 50 Boeing jets.

Furthermore, Indonesia will remove restrictions on exporting industrial commodities, including critical minerals, to the US. Such restrictions have been in place for years, enabling Indonesian firms to process raw minerals locally and produce higher-value-added products.

Earlier in July, Vietnam secured a deal that will see the US imposing a 20% tariff on Vietnamese goods, a sharp drop from the 46% announced in April, as well as zero tariffs on products the US exports to Vietnam.

"Vietnam will do something that they have never done before, give the United States of America total access to their markets for trade," Trump said on July 2 in a social media post after agreeing to the deal with Hanoi.

It remains to be seen whether other Southeast Asian countries currently negotiating with the US will follow a similar approach.

Thailand has stated its intention to maintain tariffs on agricultural imports, and Malaysia is reportedly pushing back on some of Washington's demands. US exports to Singapore are already tariff-free.

Initially, the "reciprocal tariffs" were scheduled to take effect on July 8, but the White House delayed the deadline until August 1.

Impacts on Europe

Even though the US looks set to considerably lower the tariffs on Southeast Asian exports from the initially threatened rates, settling around the 20% mark, they are likely to disrupt some regional trade links with the US, the largest export market for most Southeast Asian goods.

This could be a boon for Southeast Asian exports into Europe, where import tariffs will be lower. However, it's unclear whether European exporters would benefit, too.

According to a report last week by Moneycontrol, around 12% of the EU's exports to Indonesia and Vietnam are at risk following the US's signing of bilateral agreements with both countries. In Vietnam, this could affect $1.5 billion worth of European exports.

"If products bought from the US replace products purchased from the EU, that will negatively impact European exports to the region," Daniel Balazs, research fellow in the China Programme of the S. Rajaratnam School of International Studies at Singapore's Nanyang Technological University, told DW.

"However, the negative impact is likely to be limited, because Southeast Asian nations' interest is to maintain diversity in their trade relationships to avoid overreliance on a single actor," he added.

Alfred Gerstl, an expert on Indo-Pacific international relations at the University of Vienna, noted that in only a few sectors — particularly mechanical engineering and the chemical industry — there is direct competition between US and European companies.

But he told DW that some EU companies may reconsider their plans to relocate their production base to Southeast Asia due to the now higher US tariffs on goods coming from these countries.

In 2024, EU-Vietnam trade was worth €67 billion, of which €12.3 billion was in European exports to Vietnam, according to data from the European Commission. Indonesia imported €9.7 billion worth of goods last year, while the Philippines imported €7.7 billion.

Overall, the EU exported approximately €94 billion worth of goods to the Association of Southeast Asian Nations (ASEAN) region in 2022.

Most European exports to Vietnam already benefit from zero tariffs, thanks to the EU-Vietnam free trade deal, which came into effect in 2020, so the zero-tariff policy on US exports will have limited impact, Khac Giang Nguyen, a visiting fellow at the ISEAS–Yusof Ishak Institute in Singapore, told DW.

Increased competition?

Competition may intensify, especially in sectors such as agriculture, where American goods may gain new ground, Nguyen added, although Brussels might also use the US tariff deals as leverage to encourage Hanoi to accelerate tariff cuts under the EU-Vietnam trade deal.

Chris Humphrey, executive director of the EU-ASEAN Business Council, said that there will now be pressure on Southeast Asian states to make similar tariff offers to other trading partners, including the EU.

"It will certainly strengthen the EU's position in ongoing FTA negotiations with ASEAN countries," he told DW.

A deal with Thailand is expected to be finalized this year, while talks with Malaysia recommenced in January and with the Philippines in March 2024.

Indonesian President Prabowo Subianto and European Commission President Ursula von der Leyen met in July to express their hope of signing the economic agreement in September, following nearly a decade of negotiations.

"Indications are that in the case of Indonesia, the EU will get zero tariffs on at least 98% of tariff lines," Humphrey noted.

The Southeast Asian countries with which the EU isn't negotiating trade deals — Brunei, Cambodia, Laos, and Myanmar — currently import relatively little from European markets.

Edited by: Srinivas Mazumdaru