Why Asia Was Hit Hardest by Trump’s Tariff Onslaught
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In a few moments, I will sign a historic executive order instituting reciprocal tariffs on countries throughout the world. Reciprocal. U.S. President Donald Trump's tariff blitz shocked the world and caused a meltdown of global markets, wiping out trillions of dollars for investors.

And less than a week after he announced the steepest American tariffs in more than a century, Trump on Monday threatened China with further tariffs, an additional 50% if Beijing didn't remove the retaliatory tariffs it recently placed on U.S. imports. Much like China, other export powerhouses in Asia have been hit with reciprocal tariffs far greater than the baseline 10% levy placed on all imports to the U.S.,

American allies such as Japan and South Korea are facing tariffs of 24% and 25% respectively. And the levy for Vietnam, one of the fastest-growing trade partners for the U.S., is almost double that. And panicked investors sent stock markets nosediving.

Asian stocks from Shanghai to Tokyo to Mumbai plunged by levels not seen in almost two decades. Hong Kong's benchmark Kang Seng Index had its worst day on Monday since 1997, wiping out all of its gains for the year. Carnage, panic, bloodbath doesn't even begin to cut it. And you look at the declines on the region's benchmark, worse since 2008. It is across all

All asset classes were seeing the reeling from this ramped up tariff war. In response to Trump's threats, China took the gloves off, vowing to fight to the end if the U.S. insists on going its own way.

The tariffs announced on Liberation Day by President Trump come at the worst time for China's economy. John Liu is Bloomberg's senior executive editor for Greater China, based in Beijing. It takes away the biggest highlight, which was trade. And it also means that China is put in a position where it feels it has to respond and retaliate, which it has done. That means the threat of a real full-blown trade war has escalated tremendously.

If that happens, that's going to be bad for the U.S. It's going to be bad for China. It's going to be bad for Asia and the rest of the world because if the world and Asia cannot trade with the U.S. and the Chinese economy is nowhere in a place to be able to take on that additional burden, then where are people going to send their goods and products? And what are companies going to do about employment?

Welcome to the Big Tech Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, the impact of Trump's tariffs on Asia's economic powerhouses. Is this the end of global trade? And how will the U.S. tariffs reorder relationships across Asia?

John, can you break down Trump's tariff announcements on China and what it means? The Liberation Day announcement added an additional 30-odd percent to the tariffs. There were already 20 percent levied because of fentanyl. And so that took tariffs on all Chinese products to well over 50 percent. That's crazy. It's the world we live in today. And that was followed by still more from the White House.

Last year, Chinese companies shipped more than $520 billion in goods to the U.S., accounting for some 15% of all of its exports. Exports contributed to nearly a third of China's economic expansion last year. The country's global trade surplus soared to a record of almost a trillion dollars as higher U.S. tariffs and the threat of more to come drove companies to front-load shipments.

John, what risks do the latest tariffs pose to China? We know that it just set a GDP growth target of 5% last month, which was already ambitious, right?

Trade has been by far the highlight of China's economy over the last couple of years. At the same time, you had problems like real estate, which was a drag on economic growth. You had sedated consumption in China. That was also a drag. You even actually had government spending falling off and becoming a drag on the economy in 2024. And so going to 2025 with what was a fairly ambitious target of 5% growth for the year,

That looks much harder to achieve if you're not going to have that assistance, that input, that benefit from trade. Do we have a sense of what sectors will be hardest hit in China? Are there any companies that stand to lose a lot? The sectors that will be most affected are the ones that have the lower margins. So things like clothing, apparel, toys, lower-end electronics, those things are

will suffer the most because the companies that were making those things and exporting them to the United States had the thinnest of margins of error. And when these tariffs come in, it will probably wipe out whatever business they had going on in the U.S. It sounds like the tariffs are going to bring on a lot of pain for some Chinese manufacturers and exporters. How has China then responded to Trump's tariffs so far?

So in addition to announcing a 34% tariff on all American goods in retaliation, China also announced that it was going to limit exports of several rare earth metals to the United States. These metals are used in lots of higher end manufactured goods, high tech goods. And China's

And China is the world's largest supplier of rare earth metals. It has lots of technologies when it comes to refining these metals. And so if China cuts off that supply, it's going to have a real impact on the ability of American manufacturing to keep going. Beijing is now pledging to retaliate and vowing to fight to the end. Does that reflect the sentiment on the ground? Is Beijing feeling pressure to take off the gloves now?

Everything so far points to relatively widespread support for retaliation against the tariffs that President Trump announced on Liberation Day.

I think President Trump having introduced the tariffs in such a loud way in the Rose Garden, I think that has gotten populace around the world, certainly here in China, feeling more aggrieved and wanting more for their governments or definitely for the Chinese government to retaliate, to defend the Chinese rights.

John, Trump says his policies are designed to bring back manufacturing to the U.S. Is anybody in China talking about relocating to the U.S.? Is that even feasible?

So if you look at some of the companies, foreign companies that have pledged to invest in the United States, you have companies like TSMC. They make semiconductors. That's a very high margin product. They can afford to do something like invest $100 billion in the United States to build a factory. That manufacturing does not depend on cheap labor. It doesn't need to be in China as much.

The problem there, though, is I think a lot of those processes are very automated. I'm not sure how much employment they will generate. Certainly not as much as President Trump wants. And the other things, they're more labor intensive, lower end manufacturing. Even if those things are not being done in China, it's very hard to imagine how they can be competitive there.

in the United States relative to Latin America or Southeast Asia or some of these other lower-cost places. Working in a factory for 10 hours a day doing hard manual labor is not, I would say, the American dream. No, it's definitely not. Now, the U.S. certainly isn't making any friends with this policy. How will this reshape relationships in Asia? And really, when you look at China's footprint in the region, what does that mean?

In Asia, you have many countries in this region who have really prospered over the last 20 to 30 years by participating in Chinese economic growth, sending commodities, sending machinery, sending all sorts of goods to China, selling to China, but at the same time enjoying the security of being partnered, allied with the United States.

And so really in a Goldilocks situation, but that is very clearly coming to an end.

With the tariffs, it raises lots of questions about how much countries here in Asia can depend on the U.S., not only for security, but also for economic ties, for trade. And when they compare how tumultuous and unexpected and uncertain policy is coming out of Washington, D.C., with what has been relative stability from Beijing,

I think it will lead countries to reconsider how they balance their relationships between the United States and China. I don't think that necessarily means that we're going to see a broad migration away from the U.S. and towards China because ultimately you have a lot of countries

Japan, for example, the Philippines, Australia, that are very suspicious of Chinese intent and they have territorial disputes. And so it means they are not going to be wholeheartedly embracing Beijing, but they will be tweaking the balance of their relationship between Beijing and Washington.

After the break, how Asian countries plan to navigate the tightrope between Beijing and Washington, and how Trump's tariffs are rattling manufacturers in Asia's emerging economies. AI is redefining what's possible for your business. Are you up for the challenge? Microsoft is helping leaders like you get AI ready faster with unified data and simplified platform management, unlocking up to 150% improved output.

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Alongside China, other Asian countries—Vietnam, Thailand, and India—are also hit hard by Trump's latest tariffs. These countries are often referred to as China plus one economies. That's where companies hedge their bets by not just having factories in China, but also setting up supply chains in other countries—hence the plus one—to protect themselves against geopolitical risks.

These China plus one economies have come to rely on the U.S. as a major trading partner. Vietnam, for example, gets about 30 percent of its GDP from exports to the U.S. And around the world, the country had the third biggest trade deficit with U.S. last year, and it's now facing a 46 percent duty.

Now, to understand better how the latest tariffs are going to affect these emerging China plus one economies, we spoke with John Boudreau, a Bloomberg Southeast Asia editor based in Ho Chi Minh City, Vietnam's financial capital.

John, factory owners in Vietnam that supply to the U.S., are they freaking out right now? You know, I don't think anyone saw this coming. Words like stunned, shocked, terrifying being uttered on streets, cafes, factory floors, even in government offices.

There's fears of lost jobs and incomes. For many Vietnamese, particularly those whose lives, they were desperately poor, and the shifting global supply chains just profoundly changed their lives.

Now, John, Trump has been talking about tariffs for a while, and there have been some early indications that Vietnam might be targeted. Did Vietnam totally not see this coming or was it just not prepared for tariffs to be so high? Yeah, it was the high that that shocked them. Back during Trump's first term, he actually at one point said that Vietnam took advantage of the U.S., quote, even worse than China. So that could have been an early warning sign.

And how much can these latest tariffs damage Vietnam's economy? Vietnam's exports represent roughly 90% of GDP.

It's huge. And the U.S. is its largest market. Your Nike shoes, your Samsung phone, your Apple gadget is coming from Vietnam and other countries. And so if suddenly you're seeing a 46% tax hike on that, that's going to hurt. I mean, Vietnam has very aggressive growth plans this year, 8%. If this continues, they're going to have to be dialing back.

You mentioned Apple, John. Do we have a sense of what other businesses and industries might be the hardest hit and first? Well, certainly industries like the garment industry here just so relies on the U.S. market. Vietnam is like the second largest supplier of shoes and clothes to the U.S. Anything that makes their products prohibitively expensive for consumers just absolutely freaks them out.

Nike makes about half of its shoes in Vietnam. Adidas, it's 39%. Abercrombie & Fitch gets 30% of its merchandise from Vietnam. On and on and on. It's like a who's who of global clothes brands and shoe brands are here.

Is there a risk that that could really change very quickly now? I don't know if it could change quickly in the sense of suddenly people pivoting away from Vietnam because I don't think it's easy to set up a factory. These workers, even workers making shoes, are very specialized and the factories are specialized. So it's not something you can just pick up and move. Plus, so many other countries are being hit with tariffs, too. So the fear would be, OK, so we all pack up and move to country X. Well, who's to say you're not going to suddenly have a major...

bullseye on your economy, too. After Trump made the shock announcement, Vietnam Communist Party chief Do Lam reached out to Trump in a phone call and offered to drop all tariffs on U.S. goods. Trump described the call between them as very productive and indicated that the two leaders would meet. Meanwhile, Trump trade advisor Peter Navarro suggested that Vietnam's initiative didn't go far enough since that doesn't get rid of the trade deficit and

it has with the U.S. Now, John, apart from Vietnam, you've got Cambodia, Philippines, Thailand, India. These are all emerging countries that rely on exports for growth. How are the Southeast Asian and South Asian countries interpreting the new tariffs? I think if this continues, if this isn't just a quick shock and awe move by the U.S. to get people to the negotiating tables to cut deals,

I think it's going to dent a lot of economies. I think it's very disconcerting for a lot of these countries, these governments. And John, do you see these emerging economies perhaps trying to make a deal like Vietnam? Will they try to play nice by saying, we'll cut all our tariffs if you drop yours?

I think you're going to see a lot of delegations going to Washington. These economies in Southeast Asia, they can't match the firepower of China or the EU. Their economies are much smaller. So I don't think they could make this kind of threats. They have to just negotiate their way through this and just hope that they can come up with a package of deals that will cause the White House to relent and ease some of these tariffs.

All of these emerging economies we've mentioned, they've been caught between the two superpowers, between the U.S. and China. How do the tariffs and Trump's policies change the way that they're walking this tightrope? You know, Vietnam has long relied on what it calls bamboo diplomacy, the idea that the bamboo

moves in the wind. It can move either direction when it has to. And perhaps that could be a template for other governments in dealing with the Trump administration. They are very adept at figuring out what the great powers want and how to make sure they don't get caught between the disputes of the great powers or get entangled in issues like this. Now,

It still is not an easy situation to deal with. I think this could possibly alter some of the U.S.'s relationships with countries in this region. Certainly China spends a lot of time and effort wooing them.

Xi Jinping is planning a trip fairly soon to Vietnam and some other countries. And he's not coming in with a big stick of tariffs and yelling at people. So in the long term, this could really benefit China geopolitically in this region.

This is the Big Tech Asia from Bloomberg News. I'm Wan Ha. This episode was produced by Yang Yang and Naomi Ng. It was edited by Grace Jennings-Edquist and fact-checked by Naomi and David Fox. Mixed and sound designed by Taka Yasuzawa and Alex Sugira. Our senior producer is Naomi Chavon. Our senior editor is Elizabeth Ponzo.

Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamster-Bower. Sage Bauman is Bloomberg's head of podcasts. If you liked this episode, make sure to subscribe and review The Big Tech Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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