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| A U.S. appeals court on August 29 ruled that many of President Donald Trump's international tariffs were illegal – but allowed them to remain in place for now, giving him time to take the fight to the Supreme Court. |
A month has passed since the United States-imposed “reciprocal” tariffs kicked in and several trade deals were reached. However, uncertainties remain. President Donald Trump's flagship economic tool faces legal challenge at home and deals concluded with partners abroad may still be contested, especially if they result in more losses with little government support. While trade deficit is nominally the main basis in determining tariff rates, geopolitics can be seen playing a significant role in the overall scheme.
Debacle at home, endurance test abroad
The far-reaching impact of U.S. levies may invite persistent tests, even on the domestic front. For instance, a federal appeals court recently ruled such tariffs as illegal, adding a new twist to the turbulence unleashed since Trump's Liberation Day speech back in April. The lawsuit injects fresh doubts to U.S. attempts to reset trade ties with allies and rivals alike. The Supreme Court ruling may bear on the continued implementation of the new tariff scheme and even result in possible refunds for affected businesses if the prior judgment is sustained. Will the high court intervention stave off inflation and arrest disruption in global trade? Will it usher in a more disputed or incoherent American economic policy?
The initial high tariffs were maximum positions and were invitations to sit down and talk. Pressure to exact the best concessions was the play. Countries, which were quick to negotiate, got faster and favorable trade deals. For example, Vietnam secured a big rate reduction from 46% to 20%, although transshipment of goods retained steep charges. However, despite some announcements and photo-ops, some negotiations are still underway. Some deals also appear more as “frameworks” and legislatures in partner countries may still interpose, arguing congressional oversight or concurrence.
If lopsided or disadvantageous trade deals result in economic losses, public protests may force leadership to revoke, if not renegotiate, them. Domestic politics made America reluctant to enter into free trade agreements. This same dynamic may happen to other countries which recently entered into deals with the U.S., especially if these hit key or vulnerable sectors. Change in government in partner countries may also open these trade accords to review or amendment. Hence, fairness and mutual benefit are important for these pacts to deliver and endure.
Meshing economics with geopolitics
Addressing the U.S. trade deficit with major trading partners is a strong impetus behind Trump's high tariffs. However, more than “balancing” trade ties, geopolitics is also undeniable. Aside from the United Kingdom and Australia, which both retained their initial “Liberation Day” tariffs of 10%, other allies from the European Union (many members of which are part of NATO) to Japan and South Korea initially got between 20-25% rate, which were eventually reduced to 15%. However, in the case of the Philippines, its initial tariff of 17% was even upgraded to 19%. This is despite Manila allowing expanded U.S. military access and missile deployment and aligning with Washington in preparing for a Taiwan contingency, straining the country's ties with China, its largest trade partner. This is a missed chance to leverage greater security burden sharing and risk taking to obtain not only firmer security guarantees but also a favorable economic deal. Interestingly, the U.S. asked its allies to hike their defense spending to around 5% of their GDP, which can open doors for U.S. contractors and suppliers. Thus, allies faced the twin demands of high tariffs and increased military spending.
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| On July 27 2025, European Commission President Ursula von der Leyen and U.S. President Donald J. Trump agreed a deal on tariffs and trade. |
But while alliances did not necessarily translate to positive trade advantages, strategic considerations are unmistakable. The strong linkage between economic, security and geopolitics were apparent in Trump's tariff barrage. BRICS+, a club of emerging economies, that rivals the G7 and is raring to diminish reliance on U.S.D for trade and finance, were threatened with plus 10% tariffs. He even threatened to impose 50% tariffs and military action on Brazil as a decision on the coup trial of former President Jair Bolsonaro, a friend, nears. Trump also described the investigation as “political persecution,” but such comments and threats were viewed as interference in Brazil's domestic affairs. Brazil, China and India refused to budge under duress, not rushing to consummate a deal to eliminate the burden on their goods.
Countries with high economic exposure or viewed as being under strong influence of China also got higher tariffs. In Southeast Asia, Cambodia (49%), Laos (48%), Vietnam (46%), Myanmar (44%), Thailand (36%) and Indonesia (32%) were hard hit. When U.S. tariffs came into effect last month, goods from Laos and Myanmar were still meted with 40%. Hence, aside from preventing China from using ASEAN countries as backdoors to export to America, the U.S. may also be trying to wean away ASEAN's economic interdependence with Beijing.
ASEAN in a bind
The fear of losing access to the U.S. market and capital and the desire to keep Washington engaged in the region motivates many ASEAN countries not to retaliate to U.S. tariffs, but instead negotiate, even grudgingly. The U.S. is an important economic, security and strategic partner. While they may have misgivings with the manner by which Trump wants to reset trade ties, they are open to accommodate demands so long as it would not undermine their economic sovereignty or adversely affect their ties with other important partners. There is openness to buy more U.S. agriculture, aircraft and arms. At over half a billion people, the ASEAN market can help U.S. farmers diversify away from China. Whether ASEAN could have fared better had it negotiated as a bloc is already water under the bridge. But a deal that did not made many of them better off provides plenty of food for thought for future trade arrangements they may enter into with other partners.
Furthermore, while reducing tariffs on U.S. imports and buying more U.S. goods are easy, decreasing trade with China is not. ASEAN and China are each other's largest trade partners in the last five years. China is the biggest market for many ASEAN commodities from fruits to mineral ores. Beijing is also a big investor, infrastructure builder and partner in industrial upgrading. It delivered roads, railways, ports and industrial parks and supports green energy and mobility projects. Chinese capital is transforming Indonesia from a raw nickel ore exporter to a processor, creating more downstream industries. Of course, ASEAN countries would welcome more funds relocating from China or position themselves as alternative manufacturing hubs, but replacing China's manufacturing ecosystem is a tough ask. Chinese companies investing and producing in the region can help reduce imports of parts and components, but eliminating Chinese inputs in ASEAN supply chains is a long term undertaking, if even possible. Beijing also vowed to retaliate against third countries signing deals with the U.S. that harm its interests. This puts regional countries in a dilemma.
Trump's tariffs and the way deals are negotiated skew the scales in U.S. favor and demanded tough negotiating skills, especially on the part of small countries. Instead of competing with China through investment pledges, market access or technology transfer, the U.S. under Trump is trying to court partners by dangling tariff reduction and bilateral deals. Sadly, these only engender contempt and reinforce the view of the U.S. being transactional and unreliable.
