Tariffs diminish America’s position on Asia’s chessboard

After a few weeks of riding Donald Trump’s tariffs roller coaster, it is time to take stock of the preliminary impact on Asia’s geopolitics and geoeconomics.

President Trump, spurred by his favored advisor Peter Navarro, believes in the magical powers of tariffs to quickly accomplish several goals simultaneously: raise revenue for the government; reduce America’s national trade deficit; force onshoring of industrial capacity; and provide leverage to twist the arms of other nations on non-trade issues.

Critics point out that reducing imports and raising tariff revenue can be mutually contradictory goals. They also remonstrate that any favorable impacts of tariffs on the US trade balance and on industrial onshoring into the United States will take many years to be realized – and that only after wrenching inflation, intense supply chain disruption, and a possible self-defeating economic recession.

But geo-strategists see trade and investment as tools for expressing and enhancing national influence and power.

In fact, some China policy hawks in Washington who do not support tariffs in general still favor Trump’s protectionist agenda – but only if it is applied mainly or exclusively on China. They support the idea of isolating China economically, using trade and investment restrictions and technology denial policies that specifically target China as the America’s "pacing threat" and main global competitor.

This is why the outcome of Trump’s trade negotiations with non-China economies, especially those in Asia, is so important. In a world where China is subject to trade-prohibitive tariffs of more than 100%, but other economies only face 10%, Washington can believe that it is isolating China.

The United States started the 21st century with considerable advantage, with a strong pre-placement of stones in the form of Asian allies and partners, giving it an ability to link those stones together to constrain its opponent’s geopolitical and geoeconomic space.

But with high tariffs and inward-looking protectionist policies, Washington is weakening its position and giving up stones on many fronts of its weiqi board.

Trump’s tariffs have taken America First from the realm of uncomfortable rhetoric into painful beggar-thy-neighbor reality. Trade-protectionist leanings that started re-emerging in earnest in the United States around a decade ago have now reached exponentially higher levels.

One question dogging many multinational corporations now is what happens to their “China-plus-one” investment strategies in this new era.

With a ticking clock of 90 days for negotiations to avoid high "reciprocal" tariffs, many Asian governments are lining up to negotiate semi-binding or non-binding plans on tariffs, non-tariff barriers, purchase agreements, and investments in the United States to meet Trump’s expectations for "phenomenal" deals to justify keeping tariffs low. Many of these economies hope to get to status quo ante outcomes, but Washington is so far signaling that 10% is the new floor for US tariff rates. Japan, South Korea, India, Vietnam, and Taiwan are most prominent counterparties that have declared public willingness to engage in this negotiations race.

The one country that is not negotiating – at least not yet – is China, the United States’ largest trading partner in Asia as well as its main adversary. After showing much restraint as Trump levied tariffs on China in the early months of the year, Beijing followed Washington up the escalatory tariff ladder in April, to absurd levels that will certainly contract bilateral goods trade sharply, if tariffs are not de-escalated.

Some characteristics of the new Asia could include:

• More room for China to be geopolitically and geoeconomically assertive.
• Diminished cooperation from Japan, South Korea, and Australia in pursuing America’s China containment strategies.
• Acceleration of Southeast Asia’s political drift away from the United States.
• Heightened feelings of vulnerability on Taiwan.

On the trade policy front, as of last year it was still inconceivable that China would be allowed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the high-quality free trade agreement of 12 economies originally sponsored by the United States but abandoned by Trump in 2016. With space on the weiqi board up for grabs, China’s advance on that front is no longer so hard to imagine.

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