Has Trump’s ‘Liberation Day’ tariffs helped US trade? - Asia Specific podcast, BBC World Service

My fellow Americans, this is Liberation Day. I'm waiting for a long time. It's been just over a year since US President Donald Trump's Liberation Day, when he announced plans to impose tariffs on more than 90 countries. Our country and its taxpayers have been ripped off for more than 50 years, but it is not going to happen anymore. China was his key target, but other Asian countries also got hit hard. Starting tomorrow, the United States will implement. reciprocal tariffs on other nations.

The US tariffs threatened to upend global trade, but some predictions. that the world economy would implode didn't end up happening. Then, earlier this year, the US Supreme Court ruled. the Liberation Day tariffs illegal. So where exactly are we now with tariffs? And with an energy crisis. from the Iran war still very much affecting Asia, what's the outlook for the region?

As always, I'm Mariko Oi in Singapore, and this is Asia Specific from the BBC World Service. Twice a week we bring you Asia Pacific stories unpacked by those who know them best. And today I have two guests who've been monitoring. this tariff situation very, very closely. Deborah Elms is the head of trade policy at the Hinrich Foundation in Singapore. And Nick Marsh is a business reporter here who's been talking. to businesses across the region about the impact of those tariffs.

Welcome both. Thank you. Hello. So I remember covering this Liberation Day tariff. I think it was probably (some) of the busiest days of my career. But since then, Asian governments have been scrambling to cut deals. with the United States. While Mr. Trump chopped and changed, backtracked on some tariffs, while threatening to impose even more. So, Deborah, where exactly are we at with US tariffs on Asian countries? Most of those Liberation Day tariffs that you just talked about a year ago.

were imposed under one domestic US law, and that law was struck down by the US Supreme Court. So the top court in the land said that that law, the use of tariffs under that law, was illegal. That meant that the administration had to stop collecting a variety. of tariffs against Asian countries and instead switched to something else. And so they stopped using what was called IEEPA, the Emergency Economic Powers Act, and they moved to. some other temporary holding action, basically at 10% globally.

So all trade into the US, with some exceptions, is at 10% tariffs. And some of those exceptions are in specific sectors. So we have sector specific tariffs on things like metals. and like sofa furniture like this one and kitchen cabinets. But also we have country specific tariffs that are currently sitting at. 10%. And we're waiting for a transition in the next couple of months. to some longer term set of tariff rules.

that will allow the president to go back to what he thinks are fair tariffs. Those that were imposed on Asia ranging from 40 to 10%. So, Nick, let's remind our viewers and listeners. because we haven't actually talked about tariffs much. What exactly did Donald Trump want to achieve by imposing these tariffs? Yeah. I mean, it's funny when I tell people I was doing this podcast, Mariko, a lot, the first thing that a lot of people said was tariffs? That's a word I haven't heard for in a while.

I'm sure that's not the same for you, Deborah. That's okay. I'm delighted to someone else can. But as you know, general business. and economics reporters, you know, the news cycle moves on. We've been talking a lot about the war in the Middle East recently. and the price of oil and things like that. Um, but tariffs arguably are one of the most seismic, um, policy shifts that we've seen, you know, in the global economy. To put it very simply, Donald Trump took a look at the state of US manufacturing. and he saw that the US wasn't making anywhere near as much as it was before.

And crucially, it was importing way more than it was before, particularly from China and from from Asia generally. And that was causing a trade deficit. So importing more than you're selling. He said that was bad for the American economy. He said that was bad for American workers, that they were losing their jobs essentially to Asian workers. And the way that he thought, and his advisers thought, they would rectify.

that was to make it really, really expensive to buy foreign goods. And that's a tariff. So it's what the importer pays. in order to be able to get that good into the United States. And the long term effect of that, he argues, is. that businesses will then be encouraged to set up more factories, employ more American workers, and basically make things. in the USA as opposed to getting them from outside. Whether he has achieved those aims and whether as. a general economic ideology that is sound.

anyway in the 21st century is a whole other discussion. A lot of people disagree with that, I think, don't they, Deborah? They do. And there's one other additional piece, which was revenue, because those tariffs that are paid by American businesses. and American consumers on import go straight to the US Treasury Department. It was a way for them to collect a lot of money. in a pretty short amount of time, because tariffs went from an average. of 2% before Liberation Day all the way up, well, at one point we were at 145% tariffs on Chinese goods.

and on average closer to 20%. And so you can imagine that if you go from 2% to 20%, the amount. of revenue that has been collected by the US has been substantial. Most of that is now under dispute and is needed, needs to be refunded. And the complexities of refunding, you know, 150 plus billion dollars worth of tariffs is, you can imagine, occupying a huge amount of time and effort right now. How do you do that? How do you do that with interest?

Who gets it? Who doesn't get it? It's a subject of lots of lawsuits. But in terms of the trade deficit that Nick talked about, I mean, that was kind of the pet hate of President Trump, wasn't it? And last year, US trade deficit against China fell by 30%. And the deficit was the smallest in around two decades. And also I remember some Asian governments. like Cambodia cutting tariffs on US imports. to zero as part of their negotiation. So can you argue that maybe he got what he wanted to achieve to an extent?

No, because the numbers show. that the US actually imported more goods, trading goods. We're not talking about services or anything else, just trading goods. The US imported more trade in goods last year than ever before. So in spite of all of these tariff headwinds. and all of the additional costs, US consumers and US businesses. still bought from overseas suppliers, and they did that for lots of reasons. One is that there aren't domestic producers of a lot of the things.

that Americans buy or want to buy. And if there are domestic producers, they tend to be much more expensive. You can imagine like having to pay an American worker. versus paying, say, a Cambodian worker to make a t-shirt. We're looking at wildly different costs of that t-shirt. And so the net result is Trump says that he has reset the global economy, which I think is true actually, that part he succeeded. But where he has struggled is the getting more jobs, more domestic manufacturing. So what would it take for him to achieve that, to bring jobs back to the US,

if not tariffs? I suppose you could use tariffs to get there, but they would have to be at a significantly higher rate. Right? It would have to be so high that. the producer of, you know, sofas and t-shirts and microphones would say, we can no longer afford at 100% tariffs to import these. We will have to open up factories and Americans will have to, as Trump himself said, be satisfied with a lot less - two dolls instead of.

I think he said 37 or something, right? So you would have to... the trade off. is you would have to accept higher prices and less. of lots of different kinds of things in exchange for having these jobs. And this manufacturing takes place in the United States. This has been the big sticking point, really, because, you know, in so many words, Donald Trump is trying to turn the clock back. on 20, 30, 40 years of globalisation. and of outsourcing of jobs to less developed countries, you know, and that includes China as well.

And he fundamentally is asking the American consumer to pay more. for goods that they have been accustomed to paying very little. for a very, very long time, because somewhere the shortfall has to be made up. You know, if the wages are higher or he's asking. the American worker to be paid less, that's a simple, that's, you know, a slightly reductive way of looking at it, but that is essentially where the tariff argument kind of ends up.

Yeah. And that was the big warning, wasn't it, that this would feed. into the cost of living crisis that American consumers were already feeling? I want to just go back on this US trade deficit against China, though. How did they manage to fall by 30%? What exactly happened there? Well, we'll be arguing about this for a long time to come. I'm sure there's PhD dissertations waiting to be written, but there's at least three explanations for what happened. One is that either Chinese firms stopped marketing to the US.

because especially once tariffs hit 145%. Again, it was temporary, but it was a headline figure. They stopped marketing and or American firms simply stopped buying from China. So there is a certain amount of just reduction in demand both ways. The second is that a lot of things that used to be bought from China. directly were now shipped to the United States. and kept in inventory in the US. So a lot of especially things like packages out of Shein and Temu.

for lower priced clothing used to be ordered directly. from China and then airfreighted to the US. And now they were sent by ship, offloaded. into the US and then distributed from the US. And so the figures again suggest we had a fair amount. of that taking place in some sectors. And then the third thing is, because there was an incentive at 145% for China and 20% say, for Vietnam was the tariff on Vietnam, there was a lot of incentive for firms to say, let me use Vietnamese manufacturing as a location and then send to the US.

Some of that's local Vietnamese investment, some of that, those are Chinese companies that have moved into Vietnam. to make the thing that they then send to the US. So if you look at the the numbers, the fall in demand, US-China is largely offset by the rise in demand from Asean into the US. And so on balance, you've shifted the demand around, you've shifted those supply chains, but. you haven't fundamentally reduced the demand in the US. for these kinds of products that are supplied out of Asia.

I remember there were so many warnings. that these tariffs could completely upend the global economy, could result in job losses and so on and so on. That didn't exactly happen, though, did it? And I was reading how global trade grew by almost 5% in 2025. So Nick, why is that? Yeah, I mean, we were just talking about it very briefly before we started recording. Like trade just does find a way. You know, people need goods.

People need to pay a certain amount for goods. So I'd say there were two things that have happened. The first thing is that, yes, what was previously made. in China might now be made in Vietnam or Thailand. or, you know, depending on what you're talking about, and then going to the United States. The second thing is that producers find new markets. You know, there used to be a time when the United States was. the most lucrative consumer market, the richest market, the most voracious market. It's a bit different now, you know. I mean, obviously you've got Europe,

but you've got the Chinese market itself. You've got South East Asia which is developing in, you know, growing in population, growing in prosperity. People here need goods as well. So China maybe be selling less. to the United States, but it's less reliant on the United States. It's selling to South East Asia as well. So while that market now becomes a bit of an issue, you're like, do we rely on selling to the US so much? What are we going to do about these tariffs uncertainty? You say, well where can I sell to?

And that's kind of what's happened basically in the last year or so. And I guess this kind of coincided with this AI boom as well. that we've been seeing in the stock market and everything. And I guess that kind of encouraged more trade as well, hasn't it? Yeah. Yeah, exactly. Yeah. So, you know, this region is a big manufacturer in electronics. You look at Malaysia for example, you know, big chip producer that sells. to China that then sells, you know, around the world. And there's lots of parts which cross borders several times. before they end up in a final product.

And like you say, with this huge investment, billions and billions, trillions being invested into AI, these chips need to be made somehow. Well, also, I should note that the tariffs on things like semiconductors. and electronics have not been raised. They have been maintained at or near zero. And so that has made it easier for trade to continue. because we haven't had the same level of disruption in many parts of. the AI and chip supply chains. Doesn't mean it's across the board. As an example,

because the US has now very high tariffs in place on metal, if you make the racks that hold the servers in an AI data centre, those have gone up 50%, is the tariff cost on metal products now, especially solid metal products. So they're not, they don't have zero issues, but. the chips themselves are not tariffed. Yeah. I mean it's a cliche, but we always say markets and also businesses don't like uncertainties. And it has been very uncertain. A lot of confusion. In terms of business's reaction,

how have they been kind of navigating all these confusions? Yeah, with great difficulty. I mean, it's a cliche for a reason. You know that businesses hate uncertainty. I remember I was, about a year ago now actually, when XI Jinping visited Malaysia, he did a little sort of tour. of South East Asia just in the wake of of these tariffs, which was coincidental, but actually perfect timing for him. I went up to Kuala Lumpur and I spoke to the Malaysian trade minister. He was off to Washington. You know, it was during the 90 day pause in the tariffs.

and, you know, without revealing too much, but I basically said, what are you going to do? What are you going to say? And he was like, "I don't know.". You know, much more eloquently than that. But I'm just trying to convey a little bit. of the confusion that these tariffs caused, right, amongst governments and amongst businesses. He wasn't expecting them. Um, and he was kind of caught in a difficult position. because you can't lose the US market overnight. It's not like you're going to come in with your own retaliatory tariffs.

and you know, take on Washington. But at the same time, China is your biggest trading partner. And let's not forget a lot of what these tariffs were designed to do from the United States point of view, and what the ensuing trade negotiations went on to do, was trying to say, we want you to cut China out of some of your supply chains, right? Because fundamentally, that is the big rivalry you're talking. about between Beijing and Washington. I mean, the Malaysian government did end up cutting a deal with the United States, though. I mean, are those deals still intact or given the Supreme Court ruling,

what happened to them? We don't know. Okay. It's part of the confusion, right? So we're a year into this and it's still just as murky in some areas. So yes, we have a number of deals ranging. from what I called long ago napkin deals, which are literally. like as durable as a napkin to those that are a little more robust. But we're still, we're not talking about normal traditional trade agreements. that run to hundreds of pages and are legally binding.

These are all very small, very thin, and a number of them have been signed. They are very one sided documents. And once IEEPA fell, this statute that gave the president the authority to impose these tariffs, a lot of the governments that signed them said, well, what happens to the document that we signed. based on our understanding that this was all under IEEPA? The US continues to maintain that the deals are the deals. None of these deals, just to be clear, are actually in force.

None of them. And so there is a lot of questioning back and forth about like, how robustly do we view these? What about the investment commitments? Because that was part of a lot of the negotiations, right? The US said, okay, look, we're going to lower your tariffs. if you promise to invest X, Y, Z in, whether it's a factory or buying our products or whatever. Have they been like spades in the ground already? Has money been spent or are countries waiting to see what happens. with what happens with the Supreme Court ruling, for example? I think we've had a mixed assessment.

A lot of existing investments got repackaged and put into this. Those may be continuing. The Trump administration recognises the danger. of backsliding on these investment commitments. So one area where they have just last week. really tried to clamp down on this is in pharmaceuticals. So the United States said we're going to impose 100% tariffs. on branded pharmaceuticals. into the United States unless your firm has made commitments to invest.

And if you've made an investment commitment, then your tariffs are down 20% could be 0%. But if you've only just promised it and you haven't delivered it, there's like a stick at the end, you have this much time in which to make that investment start happening. Otherwise, you go back up to 100%. And I think it's part of the Trump administration's plan. to solve backsliding on these investment commitments, because they are, I think, understandably nervous that partners are going to say, why am I investing?

Especially... Why am I investing. potentially our taxpayer dollars into the US economy at a time of disruption. Working with this particular trade partner. Like why? And we came to the table based on threats, like you said, that didn't actually materialise in the end. or which are uncertain at the moment, but it's worth reiterating, you know, these are commitments, investment commitments, but these are jobs. You know, these are jobs, these are companies fortunes. These are, like you said, taxpayer dollars as well.

You know, these are, these are big amounts of money. which are just kind of in the air. I mean, Donald Trump really seems to love tariffs. I mean, it seems to be one of his most favorite words. Is there a method to this strategy? If you had to pick one what would that be? Well, I think if there was a clear strategy that worked, we would see it replicated elsewhere, right? We would see other governments. who say, hey, this tariff thing is not such a bad idea. We will impose them. And we have not seen that.

Other governments have said, no, we may not allow. free, you know, free flow of goods. And no one has ever allowed fully free flow of goods. But we're not going to use tariffs as the way to make that change. And so I think, Trump is, has been embarking on an experiment. that so far doesn't appear to have achieved its own objectives. and hasn't really been a policy that other governments think, "Let me replicate that." In fact, I would say the opposite. One point I would make a year into this process.

is that Asia's response is to, yes, deal with Donald Trump, placate him if you must, do whatever it is. But in the meantime, beef up your relations with others. And so we see a tremendous amount happening. in the last year on a bilateral basis. I mean, even India, which has been incredibly hostile to trade. for a very long period of time, has gone on a stampede to sign. with the European Union and lots of other trading partners. The South East Asian countries are becoming more connected as well with one another.

They're looking at these regional blocs there. We're talking about bloc to bloc discussions now. So I think there has been a lot of activity in the trade. and economic space without the US and sometimes without China, although that's a bit of a more blurry picture. But you can clearly see the reconfiguration starting. And I think I mean, we're at the early stages of this. We've basically seen eight decades of trade and economic integration. that has been comprehensively smashed.

And now you have to figure out how do we pick that back up. and put it back together in a new way? It will not look like it was, but what will that look like? Yeah, there's new relationships, aren't there? Being being formed all the time, right, out of necessity. One thing I would add to that is, you know, tariffs are not new, of course. Other countries impose tariffs, right? We have tariffs. We saw the European Union put pretty high tariffs on Chinese electric vehicles. Governments want to protect their own industries, whether that's through subsidies, they want to protect their workers.

That is pretty standard, you know, government policy. It's the aggressiveness with which. Donald Trump imposed these tariffs that shocked a lot of people. And the radical results he wanted to achieve through this strategy, which has upended a lot of these relationships. I guess uncertainty continues, though, doesn't it? Until we get more clarity on what happens to these tariffs.

Thank you so much, Deborah and Nick. Thank you very much. Thank you. It's been a pleasure. You've been watching Asia Specific from the BBC World Service with me, Mariko Oi in Singapore. If you have any questions or thoughts on what we covered in this episode. or any other stories from the region, please leave us a comment below. You can also get in touch with us on email AsiaSpecific@bbc.co.uk. and click like and subscribe so you never miss an episode. See you next time.