Why Should We Care How Southeast Asia Responds to Trump’s Tariffs?
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Well, welcome once again to Why Should We Care About the Indo-Pacific, brought to you by our producer, IEJ Media, and our sponsor, Bauer Group Asia. We'll talk more about them in due course.

I am Ray Powell. I'm the former military officer in California. That's Jim Caruso down in Arizona. He's the former diplomat. Jim, we have a return guest who our audience has never heard from. How does that work? Well, it's like ghosts in the machine, only our guests are the ghosts. He is, in fact, John Goyer, the executive director for Southeast Asia at the U.S. Chamber of Commerce. We spoke to John a couple of weeks ago about tariffs and what we might expect.

But since then, since we've had so-called Liberation Day, the world has turned so many times up and down, side to side. We thought it'd be better to bring John back, which he's graciously agreed to do, to talk about where we are today. And today is April 10th.

Just so we're all clear. And just to be clear, Jim, we did not release the previous episode with John because we thought our audience would listen to it and say, what are these guys talking about? The whole world is turned upside down. Yeah, well, they say that about most of our podcasts anyway, but in this case, it was particularly egregious. So, John, welcome back again. Really appreciate you coming back. So we'll start off with the latest version of where we are with tariffs and liberation.

Why should we care about how Southeast Asia reacts and responds and implements a response to U.S. tariff policy? Well, Jim and Ray, thanks very much for having me back. I'm glad to be on the Frequent Flyer program with your podcast. You know, I do feel like...

You know, with everything changing as rapidly and as head spinningly as it has been, I think I'd make two points about that. First, I think that we all need to hook up a Dramamine IV unless you like being on a roller coaster all the time.

But secondly, you know, this what we talk about today may well have a pretty short shelf life, but we'll do the best we can with it. And I should add that I'm speaking in my personal capacity here. So these what I say may or may not represent the views of the U.S. Chamber of Commerce. So that's it. Why should we care about tariffs on Southeast Asia?

Well, for the same reason that we should care about them anywhere else, which is that they are taxes. They are paid by American producers and by American consumers. They raise prices, in this case, on just about everything. They do tend to be accompanied by slower growth, by retaliation from our trading partners, which we've seen to some extent.

And they cloud the long-term economic outlook. And I think the markets have rendered their verdict on that score. Now, I will say that yesterday's announcement, where we would have tariffs as high as 49% on Cambodia, 46% on Vietnam, etc., coming down to 10% is good. It's welcome, certainly less destructive if that pause holds.

But that is still a significantly higher level of import taxation than we had previously. So at 10% across the board, setting aside higher tariffs on steel and aluminum, for example, autos, auto parts,

We are still looking at a $35 billion import tax based on 2024 levels of imports from Southeast Asia. So that's substantial. And so in imports, tariffs are taxes. Americans pay them. The foreign partner does not pay them. So I think that's a message that I can't believe we still have to reiterate, but it seems that we do.

All right. So let's start with where we are. We had the Liberation Day announcement last week. Today, as we're recording this, it's Thursday, April the 10th. We're going to try to put this out on Friday, April the 11th. So we had the announcement. And then we had this sort of immediately, first in line was the General Secretary of the Communist Party of Vietnam, Tho Lam, who

on the phone with Donald Trump saying, we're going to drop our tariffs on the U.S. to zero. And that was immediately tweeted out by Donald Trump himself, actually put out immediately. So isn't this an indication that actually this is a strategy that's working to achieve some of Donald Trump's objectives?

Well, possibly, but I have heard a lot of reasons put forward as to why the administration wants to enact tariffs. It's been about reshoring production to the United States. It has been about raising revenue. Maybe part of it is incentives for trade negotiations. It is meant to address market access barriers, non-tariff barriers in foreign markets. It's meant to correct the trade balances.

And most recently, the other day, the chairman of the Council of Economic Advisors said that, in essence, well, this is a payback for the global commons, for the global public goods that the United States has provided over the years in the form of military security, in the form of the dollar as a reserve currency. So there's lots of reasons that have been put forward as to why they're doing this.

which makes it difficult to speak to what any strategy might be. Now, as you said, the result has been that Vietnam and several dozen other countries have come forward and asked to negotiate with the United States. I think that's a positive development. Vietnam, like many other countries, has a lot at stake here. And certainly a 10% tariff is bad enough. A 40%

46% tariff in Vietnam's case would be terribly destructive. So there are incentives to negotiate. And I hope that will happen. I hope that it will happen in a successful way. In Vietnam's case, and I think this applies elsewhere, I would add that they talked about reducing tariffs to zero.

That's all well and good. Vietnam's tariffs in the main aren't particularly high, and the real problems that U.S. companies face are in the form of non-tariff barriers, which themselves take many different forms. So tariffs are part of it. Non-tariff barriers are more important. I guess my other concern is, we're calling this a negotiation, and negotiation usually means both sides have to give up something. But I'm not sure what

This administration in Washington is willing to give up. How do you think these will go, these negotiations?

Yeah, well, and I think that's a reasonable question. You know, on the face of it, it looks like what they're willing to give up is the threat of enacting a 46% tariff, but, you know, then otherwise going back to kind of the status quo. But what new would they want to give up? And would Vietnam or any other country feel that they're in a position to demand more than what they already have in terms of access to this market?

I'm not sure. But I think that part of the problem is going to be getting back to the multiple reasons that have been put forward as to why the administration wants to do this. The demands from the United States have been inconsistent, and I don't see how trading partners could satisfy all of those demands. If you look at the reciprocal tariff announcement last week,

We put tariffs on countries with which we have high trade deficits. We put tariffs on countries with whom we have trade surpluses. We put tariffs against countries that have lots of tariff and non-tariff barriers. We put tariffs against countries that we really don't have any of those kinds of barriers with, or certainly very few. So, you know,

Given the myriad of objectives that seem to have been put forward, I think it's really tricky for trading partners to respond effectively to those demands. So as you mentioned, we've heard any number of different rationales for why we're doing

implementing this tariff strategy. Everything from we're trying to, you know, rebalance global trade. We're trying to reinvigorate our manufacturing base. We're trying to get, you know, American jobs. We've got lots and lots of different rationales. And what that's led to is certain voices in the administration saying we're not negotiating and others saying this is absolutely a negotiation tactic. And then, of course, now we have this 90 day pause.

What is your best assessment as to what actually drove the 90 day pause? What do you think, you know, Donald Trump is thinking when he when he realizes or what did what did he cut? What decision what drove his decision to go ahead and pause this thing except for on China?

Yeah, well, the China conversation itself is especially fraught. And I don't think that there is any appetite to really ease up the pressure on China. There's been a cycle of retaliatory tariffs and counter retaliatory tariffs against China, which now bring our average tariffs against Chinese products to something in the 150% range.

So I think that one needs to be treated in kind of its own bucket. But, you know, in terms of why the sudden about-face thing,

it seems pretty clear that it's been the reaction of the markets, both equity and bond markets and the severe reaction. You are seeing more and more predictions of recession. JPMorgan Chase last week put the odds of a recession at 60%. It's clear that consumer confidence is down in spite of good numbers in terms of household income.

consumers are actually spending less and they're spending less because of all this uncertainty. And people are smart enough to know that tariffs are going to raise prices. I actually bought a new car the weekend before last. My old Kia Sorento was on its way out. And I wanted to get as much life out of it as possible. But my wife and I were looking at the tariffs coming up and we decided we need to buy now.

Because this is going to be a whole lot more expensive a little bit further down the line. And apparently lots of other people felt the same way because this particular Kia dealership was mobbed. And the fellow that I work with that sold us the car said, I've never seen a day this busy. So, you know, that is what's happening. Consumers do feel that inflation is coming. The markets are reacting negatively. Business sentiment is down. And so, yeah.

I can only assume that those were all factors in the president's decision. So these tariffs on China are basically going to end trade with China, as far as I can tell. 150% tariff just makes things too expensive. But Southeast Asia's largest trading partner and largest export destination is China. So what's going to happen, do you suppose, to these countries' trading relationships with China and to their economies?

Yeah. Yeah. Well, so for Southeast Asia, anyway, it gets tricky. What we saw during Trump 1.0 and the initial batch of Section 301 tariffs against what ended up being about half of Chinese products is.

led to this relocation of substantial amounts of investment and sourcing activity from China into a number of other countries, especially in Southeast Asia, and among those, particularly Vietnam.

And so then you saw it reflected in the investment numbers and certainly in the trade numbers, where as U.S. imports from China went down, U.S. imports from Southeast Asia went up. And it was almost dollar for dollar if you plot it out on a line chart. Now, if...

Well, first of all, I would expect that that's going to continue. 175% tariffs, Jim. I think you're right. Unless there is just utterly inelastic demand for certain products, I don't see how that kind of price increase can reasonably be absorbed without killing trade. So...

I would think that there'll be a lot of pressure to purchase from elsewhere. And I think that you'll see a continued pattern of relocation of some of those manufacturing operations out of China. Now, this was encouraged during the first administration, at least implicitly. And so companies and countries that essentially did what the administration wanted to

during Trump's first administration are now being punished with these tariffs or these threatened tariffs. And so that really puts Southeast Asia in a bind. If 10% tariffs prevail, okay, then you can have, you know, everything will be more expensive, but you can still have kind of tariff arbitrage, I guess,

And so that would be one thing. But if the reciprocal tariff rates end up being implemented with some of these countries, then it becomes that much more difficult and complicated. Now, the other piece of that is that Southeast Asia itself has been under enormous pressure with its own imports from China.

In part, as a result of the first iteration of the U.S.-China trade war, all that excess Chinese capacity had to go somewhere. And so you've seen a lot of dumping of Chinese goods really across a broad range of product lines into Southeast Asia.

Southeast Asian countries have responded, you know, banning some of the Chinese e-commerce platforms or being more aggressive in anti-dumping investigations and that sort of thing. So the region is responding. It's not doing so in a coordinated way, but.

It is certainly feeling the pressure. You've seen a lot of factory shutdowns in the garment sector in Indonesia and in some of the auto industry in Thailand, as example. So they're in the position of sort of caught between the Silla of the United States and the Caribbean of China to a

go back to the Odyssey. So not an enviable place to be. So one aspect of all of this is the legal aspect. To what degree does Donald Trump have the authority to do this without Congress, given that the tariff authority is explicitly given to Congress in the Constitution? And in order to do this,

He has essentially declared an economic emergency in order to justify his tariff plan. Is there any sense that countries may view this 90-day reprieve as an opportunity to maybe let the legal part of this play out in the United States, and maybe they don't have to worry about this as much as they do if at some point the Supreme Court says, you know, everybody out of the pool.

Sure, sure. I think that countries in Southeast Asia may be hoping for that. And I think that companies in the United States are hoping for that. You know, I think what has happened over the years and over the decades is that although Congress does have the constitutional right to regulate tariffs and taxes, trade policy authority has been delegated to the executive branch over the years.

And, you know, I think if you talk to people around town, there are a lot of questions raised about, you know, whether or not the emergency, whether or not some of these 232 investigations, how solid a legal foundation are they on? And I think those are some fair questions. You know, is the trade deficit real?

which we've had since the 1970s, a national emergency. And if so, why? It's certainly not a new phenomenon. And in the 232s, I think you could question whether automobile imports and parts constitute a national emergency. We have a 232 investigation underway on timber, lumber, derivative products.

So would importation of toilet paper be part of a national emergency? So I think... John, I'm sorry to interrupt you, but just for a second, could you very quickly explain for our audience what is a 232 investigation?

Sure. 232 is a section of U.S. trade law that allows the president to initiate an investigation of imports of certain products that could be deemed to represent a national security threat for the United States. And the key is investigation, not you slap on tariffs, then you investigate, right?

Well, ideally, that's the order. And ideally, the decision is made based on the outcome of the investigation rather than making a decision, then going through the investigation as a pro forma exercise and then doing what you actually wanted to do in the first place. So not not first the hanging, then the trial. Just just to refer. Ideally. OK, that works. OK.

So under Trump 1.0, he negotiated new trade deals with Canada and Mexico together and Korea and Japan. And now all those basically have been ignored. So if I'm a negotiator for Vietnam or wherever, am I concerned that the deal I negotiate today may not last very long?

Well, I think it's a fair question for sure. But I also think that the threatened tariffs under the reciprocal tariff announcement are so high that for many countries, it's kind of verging on an existential issue to

be able to negotiate those back and get whatever deal that you think you can. So I agree that it's a concern, but I think the primary or the initial concern is simply to try to have a negotiation that gets to some more reasonable tariff level or can do away with the tariffs altogether if enough can be offered in return.

So there was some noise, I believe, last week and maybe into this week about the ASEAN nations getting together to have some kind of a coordinated response. And yet at the same time, you've had individual countries sort of rushing forward with their own responses. Do you see any hope that ASEAN will actually get together on this? Or is this just moving too fast and our country's just going to look out for their own interests?

I think it's really difficult for ASEAN as an institution to respond in a coordinated way to something like this. Each country's economic interests do differ quite a bit. Their levels of trade with the United States differ. The kinds of American investment in those markets differs. So I think it's hard.

even under the best of circumstances for a region as diverse as ASEAN to adopt some kind of common denominator negotiating position with the United States.

You know, Prime Minister Anwar has talked about this. Malaysia is chairing ASEAN this year. And, you know, I know that he would like to see some sort of coordinated response. But I think in this instance, the national interests of ASEAN's individual member countries will be what carries the day. So there's been a lot of discussion of countries diversifying their export markets, basically away from the U.S.,

So do you see a move towards more and more trade agreements between blocks or countries that eliminate the U.S., leaving the U.S. basically as a high cost exporter to these countries?

Well, I think that's actually already been underway. And the reciprocal tariff announcement and the other announcements on tariffs recently will simply accelerate it. But it's been an existing trend. You know, the ASEAN countries individually and collectively are party to on the order of 230 some trade agreements.

So, you know, among ASEAN itself, its individual members have agreements, you know, within Asia, with the European Union, with Australia, some Latin American countries. So they're already doing this. And I would expect that that will accelerate.

And actually, that gets on, you know, that sort of connects to another point that is worth considering here in terms of American investment in Southeast Asia. So the U.S. has always been a big investor in Southeast Asia. That was accelerated during Trump 1.0 because of the China situation we discussed. But it's not new. It goes back much further than that.

Because Southeast Asia has been, with very limited interruptions, it's been a high growth region. They have enjoyed high rates of GDP growth for decades. And so for that reason, it's attractive to U.S. companies.

But U.S. companies are, well, first off, I mean, you know, looking at it as an investment destination, we have more direct investment in the ASEAN countries than we do in China, Japan, Korea and India combined. We now have more direct investment in ASEAN than we do in Canada for the first time ever. So it's pretty remarkable the levels of investment that we're talking about now.

Why are U.S. companies investing in the region? You know, there's two reasons primarily. One is sales to customers in the region, sales to the local market, and then sales to third countries. So take the first piece of that. You know, U.S. companies set up shot. An American company sets up an operation in Thailand to sell insurance policies to Thai customers.

Those sorts of examples, you know, selling in the local market account for a little more than a third of the total sales of U.S. affiliates that are on the ground in Southeast Asia. The second reason they invest is to sell to third countries. So the output from U.S. companies' operations is

To take the Thailand example, you have an electronics manufacturer in Thailand who sells output to Taiwan or to Malaysia or Japan or other markets. Those kinds of sales to third countries account for a little over 50% of that total. And so the remainder of that, about 11%, are sales back to the United States. Now, that's not nothing.

But it's small as a percentage of the total. So U.S. companies are not setting up in Southeast Asia to sell back here. That's that's not what's happening. They are selling to the local market or they're selling to third countries. And so, Jim, to the question about all these trade agreements and diversification of partners here.

U.S. investors in Southeast Asia are beneficiaries of those agreements. They can avail themselves of the benefits of those various pre-trade agreements, utilize those to increase their sales. So that diversification benefits U.S. companies that are on the ground in the region. And I think it increases the incentives for U.S. companies to physically set up.

in the region. Now that's fine and that's important. Take the S&P 500, about 41% of their total revenues come from overseas sales. So these are important to the US economy. Of course, the ones who are disadvantaged in all of this are the US-based exporters that may not have the wherewithal to set up in the region.

And particularly if we start seeing retaliatory tariffs, it becomes that much harder. So I want to come back to the negotiations for a second. Let's say you're Tulum, you're Vietnam, and you've come to the United States and you've said, look, I'm going to cut my tariffs to zero.

And of course, the United States is going to say, that's great. That gets you in the room. We're going to start to have a conversation. But that's not enough, right? Because we've got all these non-tariff barriers that are of concern to us. And of course, they express that in their interesting little formula that they put out with the Greek letters and things that basically said, it's not just the tariff rates, it's all of these barriers. So if I am one of these countries, what else am I offering in exchange for lower U.S. tariffs?

Sure, sure. Well, first off, the formula actually did not take into account either existing tariffs or non-tariff barriers or anything else. It was simply a matter of total imports divided by the trade deficit, and that's how they derived. And then they cut it in half, and that was the discount that was offered magnanimously on this.

No, what can they offer? You know, OK, address the tariff straight off. That's fine. Average trade weighted applied tariffs on American goods coming into Southeast Asia are generally in the low single digits. So that doesn't make a lot of difference, although it should also make it an easier thing for other countries to offer up.

Now they can offer to purchase more U.S. goods, and that is exactly what they're doing. So, you know, we hosted the deputy prime minister of Vietnam this morning here at the chamber, talked about exactly this and Vietnam's intent to purchase more U.S. products, Boeing airplanes, liquefied natural gas, and other things. And other countries are talking about similar sorts of pledges. So that's good.

And then addressing non-tariff barriers, which is, as I said, that really, in many ways, gets at the heart of many of our members' concerns in terms of access to the Vietnamese market or other markets in the region. So, you know, those are the sorts of things that could be offered up.

I think one of the problems with non-tariff barriers is these are very complicated issues, typically having to do with what they call sanitary and phytosanitary issues. So health issues on agriculture. Some of it is domestic content on their TV and movie screens. So these get into very difficult political issues. And my question is, in 90 days,

with all these countries, is there any hope to come to agreement or would you expect a rolling series of extensions as a way to be able to actually conduct the negotiations? Well, I think the first problem we have right out of the chute is who makes it onto the priority list. Because if there are 50 some odd countries that are looking to negotiate with the United States over the next 90 days,

what's the priority going to be? Presumably the priority is going to be the larger U.S. trading partners. So maybe that could include Vietnam in this case. But smaller countries, I think, would end up falling by the wayside simply for lack of negotiating capacity here right now. But, you know, I think if you set that aside,

I think countries can certainly make pledges to address particular non-tariff barriers. You know, we have...

raised some issues with Vietnam or Indonesia, other countries for years. And for policymakers in those countries, they're not going to be new. They know what we've been asking for. They know what we want. So it's not going to be new news. It's politically maybe difficult in some instances and hard decisions would have to be made.

Could you actually change particular rules and implement them in 90 days or less? No, but you could make pledges to do so. There could be understandings. You could come to an agreement that a particular regulation, a particular issue would be addressed. And of course, implementation is going to take longer just as an administrative and mechanical matter. But you could make those pledges.

Could there be among these countries, could there be winners in this scenario that seems to be playing out either because the effect on China is so catastrophic that they have just boundless opportunities to sort of move in where China, you know, basically if China is going to lose, somebody has to sort of step in.

Of course, that was already happening under the previous regimes. But then even among Southeast Asian nations, Vietnam's looking at 46 percent, Philippines is looking at 17 percent. Could the Philippines just win by not losing as much as Vietnam?

Well, yeah, and there was actually some speculation on that question in the Philippine press. You know, does the Philippines have the capacity to absorb certain kinds of investment where it would make sense to relocate in order to get around a 46% tariff wall as opposed to 17%?

You know, there's workforce issues, there's infrastructure issues, and there's issues simply of the time that it takes to invest, to relocate facilities, to hire your workers, to set up your supply chains. And these are all the same challenges that would be faced for any company that was actually going to reshore back to the United States. So it's going to be the same challenge in some of these countries.

You know, winners...

You know, I think our view has always been that the benefits of liberalization accrue primarily to the country that undertakes the liberalization. And so if Vietnam or other countries in the region do address tariff and non-tariff barriers, and that facilitates greater trade and greater investment and therefore higher levels of economic growth, then that is, in my view, a winning scenario.

Singapore has basically no barriers, right? Tariff, non-tariff, open. We have a trade surplus. I take President Trump at his word that some barriers, some tariffs are going to be permanent, some not. And my impression is the 10% tariff on everybody is going to continue to apply. What will be the impact both on the region and the United States if that's the case?

Yeah, there has been a lot of talk that, you know, the reciprocal tariffs will be the part that can be negotiated away, but the 10% tariffs will be a more permanent feature of the trade landscape. So I think we are hearing similar things.

Well, the effects here will be that prices will go up. There'll be less efficiency to the extent that incumbents are protected in their market. They have less incentive to innovate. So certainly consumers will suffer from that. If it's 10% for Southeast Asia, though, and 150% for China or higher for other markets, then obviously there is a benefit there.

to looking at shipping, to relocating some operations in Southeast Asia and shipping from those countries to the United States.

Even if you're paying 10% tariffs, if it's 140% less than what it would be coming from elsewhere, then you do have that cost advantage. But at the end of the day, it's still going to be higher prices for U.S. consumers. And at the end of the day, it still will have some dampening effect on overall trade. Last year, we had an average...

MFN tariff of about 2.5%. Most favored nation. Yeah, yeah. So our most favored nation. And so...

That would be a quadrupling of that tariff without even taking into account the auto tariffs, the steel and aluminum tariffs, the upcoming potential tariffs on pharmaceuticals, on semiconductors, the timber, lumber and derivative products of those things. So a quadrupling of taxes would

will not be beneficial to the American consumer or to the American producers who import parts, components, raw materials from the region. Their costs go up and those costs have to be passed on in some way, shape or form. So underlying a lot of the discussion about tariffs generally has been a broad based consensus among pretty much both parties for quite a while that America's manufacturing base has

eroded to a point that makes us weaker as a nation, that it makes us more vulnerable to sort of outside forces, whether they be military forces or economic coercion or those kinds of things. First of all, do you believe that American manufacturing does have that problem? And secondly, if so, isn't this a way to address it?

Well, American manufacturing output is as high as it's ever been. Unemployment, employment in the sector is much lower than it used to be. And that's simply because you have technology, you have increases in productivity. In short, you're able to produce more output per unit of input. And so that's simple productivity growth. And if you don't have productivity growth, you don't have economic growth.

So, you know, there's a lot of talk about reshoring all these manufacturing jobs. But the fact is, to the extent that there is reshoring, it's going to be heavily, heavily automated. These are simply not assembly line jobs that that would be that would be coming back. I think on the national security implications of it, you know,

Certainly, it makes sense to have that conversation if we're talking about semiconductors, for example, or other components in weaponry systems. But what's the national security implication of imported toilet paper? What is the national security implication of imported? I'm sorry, sir. Did you not live through COVID? Your store obviously had lots of toilet paper.

I really don't want to go back to that. But I think there has to be a serious conversation about that. I think the previous administration recognized that semiconductors, for example, do occupy kind of a unique space. You had the CHIPS Act and substantial subsidies to draw back

Some of that manufacturing. But I think that some manufacturing is more significant than other manufacturing in terms of national security. And so that's the conversation that really needs to be really needs to be had. It has to be more carefully defined and and policies tailored accordingly.

You mentioned the additional tariffs expected on pharmaceuticals, and that frankly blows my mind because already managing health care costs is a huge part of our issues in the U.S., including for the federal budget. So what is the rationale behind that one? Yeah, I honestly don't know other than kind of the same argument that's been put forward in other sectors, which is that we need to have

those materials produced here, that it is important that we not rely, and actually this probably does, Ray, this probably does go back to COVID to some degree, but, you know, not having to rely on production in other countries to be brought back into the U.S. because of the national security or the healthcare implications of that. But in the short term,

at least, that is a huge problem. And I think pharmaceuticals, like other sectors, needs to be properly incentivized in order for production to be relocated back here. And I think one of the things we need to think about is what does that mean in terms of costs to the consumer, to the patient? That's what we really need to be looking at here.

All right. Well, John Goyer, you are the executive director for Southeast Asia at the U.S. Chamber of Commerce. So we'll get you out of here on this exit question. John Goyer, as the executive director for Southeast Asia at the U.S. Chamber of Commerce, what was Liberation Day like at the U.S. Chamber of Commerce? Yeah.

Well, it was jaw dropping. You know, if it was meant to have a shock and awe effect, then it succeeded. You know, I certainly did not expect tariff rates at the levels that we saw, nor did I think most other observers. The 10% would not have surprised me.

46% on Vietnam. Yeah, that surprised me. 36% on Thailand. That surprised me. Similarly high levels for some of the other countries. But what was even more surprising was, as I talked about, digging into the formula, how that was actually derived. Because we were led to believe, based on what the administration had been saying, that

that the tariff number, the reciprocal tariff number, would be a combination of looking at existing tariffs, looking at non-tariff barriers, looking at issues like VAT taxes, for example. And then it turned out it wasn't that at all. It was simply the size of the trade deficit. And that became the denominator here.

or the numerator, one of those. But that was the basis of of the formula. So I think we're a little surprised at the at the simplicity of it. And of course, that led to its own kind of strange consequences where you ended up with the highest tariffs on some countries with which we have very little trade, you know, Laos, Myanmar, Cambodia. And it also, unfortunately,

led to high tariffs against the highest tariffs against some of the poorest countries too. So I think that was... You were just confused because they used Greek letters and nobody there spoke Greek. All right.

John Goyer, you have been really helpful for us to help try to get our heads around what's been going on here. Thank you so much for coming on again, even though we never aired your first episode. We are definitely twice as smart than we were when we started this whole mess. And we hope we'll have you back again.

Well, Ray and Jim, it is always a pleasure, always happy to have these conversations. And, you know, maybe if that that first podcast shows up in the lost files somewhere 10 years down the road, it'll be a collector's item. Somebody could get a lot of money for it. Exactly. Exactly. We were just talking about getting merch. Somehow we'll try to figure out how to monetize that. All right, John. Thanks so much.

All right. Well, these are tough times, very difficult times if you're in business. So if you are in business in Southeast Asia or anywhere in the Indo-Pacific, you'll certainly want to look up our friends at Bauer Group Asia, our sponsor for this podcast. They are a strategic advisory firm specializing in the Indo-Pacific, and they apply unmatched expertise and experience to help clients navigate the world's most complex and dynamic markets. Jim, these are indeed complex and highly dynamic almost from day to day.

Jim Caruso, of course, is a senior advisor with Power Group, and you can look them up at their website, powergroupasia.com. Jim, complex and dynamic. Well, you know, it's important to remember the U.S. Chamber of Commerce is sort of the representative for U.S. business, large and small in Washington. Their office is right across Lafayette Square from the White House.

So to hear John say they were totally surprised by the announcement of the size of the tariffs, they had no time to prepare, which of course means their membership, all those businesses had no time to prepare. And when you're a business and you don't know what's going to come and hit you with like a ton of bricks,

That makes you a little nervous about investing, hiring new employees. Where do you go? What do you do? So it's a very difficult situation. Well, and it also really does tell you something because, you know, the reason they have their offices there is so that they're not surprised because they're going to hear about what's actually coming down the pike when they are out to coffee with their friends in government or, you know, over at the bar having cocktails at the end of the day or even, you know,

God forbid, in official meetings. So that's why they're there. And so if they are surprised, it tells you just how centralized and unpredictable, even within the administration, these decisions have been. Well, I'm afraid what it does come down to is in the past, as you know from your time in Washington, you talk to people who know people, who have influence, and you sort of get what the zeitgeist, what the mood's going to be. And that usually is a pretty good indicator. Yeah.

And this administration really comes back all down to Donald Trump, one man, and who he talks to last or what. There's no way to discern the end result. So it makes it, again, very difficult to plan. Well, we should certainly continue to remind people to be in touch with Jim Caruso and the rest of those folks over at Bauer Group Asia. So, Jim, these are difficult times. So tell me a story about simpler times.

Well, back in the early 2000s, we had a situation where we called competitive liberalization, if you can imagine such a thing. And the background was the World Trade Organization was having trouble coming up with a new grand approach to trade liberalization. So our trade representative at the time, Bob Zoellick, said, all right, we're going to have a series of bilateral free trade agreements.

And that way it will force different countries to say, oh, if this country has a good agreement with the U.S., we'll be disadvantaged. So we want to have our own. So at that time, we negotiated one with Singapore. I was involved in one in Australia. And then in Thailand, we were negotiating one. Now, each negotiation is its own thing. And at the time, it was Thailand, the chair of the Senate committee that approves these

agreements was his senior senator from Montana. And he really wanted a trading session, a negotiation session in Great Falls, Montana. Great Falls, Montana. If you go to the middle of nowhere in McAlef- You're from Thailand, right? Yes. Very familiar climate. To get to Great Falls, Montana from Thailand was about a 24-hour trip. Yeah. There's no direct flights. I was as surprised as you are. Yeah.

So we got to Great Falls, Montana. Thais are very particular about what they eat. They like Thai food. I once asked my staff, they would join me for sandwiches at lunch, and they said, oh, Kunjim, we're Thai. We do not do sandwiches. So these poor Thai people in Great Falls, Montana, were desperate to find a place where they could have some semblance of Thai food. And thank God there was one

American Chinese restaurant with a Cambodian chef who could make a semblance of Thai food with what ingredients he had, like cucumber instead of green papaya. Just like Mama used to make. Well, no, Mama would die over this. But the best part and what cheered the Thais up enormously was there was a bar and behind the bar was a giant fish tank, a huge fish tank. They had human mermaids swimming around. Real mermaids?

Well, I didn't ask or check that closely and they were wearing tops. But it was a wonderful thing having your drink with the ties as a mermaid swam by. And you'll be pleased to know they did go up for air because I didn't see any ex-mermaids lying on the bottom. Things we do for our country. Amen.

All right. Well, someone who does a lot for our country is Ian Ellis Jones, our producer of IEJ Media. Please follow him on X, where many, many other people do to get his latest military and geopolitical graphics at Ian Ellis Jones. If

If you enjoyed this episode, please take a look at, this is by the way, I believe it's going to be episode number 70. Jim, we've done 70 of these. And you can go see those over at our, of course, our YouTube channel, which you may already be on. It's youtube.com at IP podcast. Of course, you can also listen to us on your favorite audio streaming podcast service. Just look for our name. Why should we care about the Indo-Pacific?

If you've enjoyed this one, you can go back and listen to our last one where we asked very similar questions about Japan from Chris Johnstone, our former CSIS, now Asia Group expert on Japan. Of course, you can go all the way back and we talked about the U.S.-ASEAN Business Council, if you're interested in Southeast Asia. And when we heard from their president last year, former Ambassador Ted Osius, once my boss,

and learn more about how business does work, does business in Southeast Asia. Of course, you can find us on all the social media. Well, at least LinkedIn and X and Blue Sky. Again, look for our name. And you can email us, indopacificpodcast at gmail.com. That's indopacificpodcast at gmail.com. Finally, we want to give one more shout out to our great sponsors at Bauer Group Asia.

For Jim, for Ian, I'm Ray. Please join us again next time on Why Should We Care About the Indo-Pacific?