Trading Blocs and Political Shocks: A New Economic Era Unfolds

The US has been a key actor in globalization and has engaged in trade with nearly all countries. On April 4, US President Donald Trump announced a sweeping series of country-specific tariffs, which included harsh levies on Southeast Asia and Oceania. These developments have already begun to transform—and will continue to reshape—the way the global economy operates.

President Donald Trump speaks during an event to announce new tariffs in the Rose Garden of the White House, Wednesday, April 2, 2025, in Washington, as Commerce Secretary Howard Lutnick listens. (AP Photo/Evan Vucci)

In Southeast Asia, Cambodia— a developing economy where 17.8% of the population lives below the poverty line—is the worst-hit country in the region, facing a tariff rate of 49%. Following Cambodia is Laos, with a 48% tariff, where 18.3% of the population lives below the poverty line, according to the Asian Development Bank (ADB). Vietnam and Myanmar follow with tariff rates of 46% and 44%, respectively. Thailand, which has the second-largest economy in the region, faces a 36% tariff, while Indonesia—the largest economy in Southeast Asia—faces a 32% rate. Malaysia and Brunei each face tariffs of 24%, the Philippines 18%, and Singapore the lowest at 10%.

Workers are seen in a sanding area for stocks being prepared to be shipped to the U.S. at Corporate Specialist's factory on the outskirts of Muar, in Johor state, Malaysia, Friday, April 11, 2025. (AP Photo/Vincent Thian)

In addition to these country-specific tariffs, Trump has announced a 10% universal tariff on all imported goods. He has justified these measures as retribution against countries that have long “cheated” America. Unlike China, which has retaliated with its own levies, the official stance of Southeast Asian governments has been: don't panic, don't retaliate—negotiate.

Vietnam’s Deputy Prime Minister Ho Duc Phoc has traveled to Washington to plead his country’s case, offering to eliminate all tariffs on US imports. Thailand plans to send its finance minister to make a similar appeal, proposing to reduce tariffs and increase purchases of American products such as food and aircrafts. Likewise, Cambodia has appealed to the US to postpone the tariffs while it seeks to negotiate. However, for countries like Myanmar, internal conditions such as civil war or natural disasters leave no realistic capacities to purchase US goods.

People clean debris from damaged buildings in the aftermath of an earthquake on March 28, in Naypyitaw, Myanmar, Monday, April 7, 2025. (AP Photo)

These new tariffs threaten to disrupt global supply chains, deter investment, and slow GDP growth at a time when ASEAN nations need robust economic performance to reduce poverty, improve education, and address climate change. If these nations fail to coordinate responses to these external shocks, ASEAN’s status as a unified economic bloc—which is projected to become the world’s fourth-largest economy by 2030—is at risk.

Millions of working-class citizens—particularly in manufacturing hubs like Indonesia, Thailand, and Vietnam—face the prospect of declining export demand, reduced factory output, and job losses. Small and medium-sized enterprises, which make up more than 90% of ASEAN businesses, are especially vulnerable. Many would struggle to absorb the impact of the new tariffs or would be forced to pivot to alternative markets. History shows that economic instability often leads to political instability. In Southeast Asia, where democratic institutions in several countries remain fragile, this poses a real risk. If ASEAN fails to respond with rights-based and democratic governance at its core, the region may emerge from this crisis more divided, more unequal, and less free.

In his Ministerial Statement, Prime Minister of Singapore, Lawrence Wong, stated that the nation will strengthen collaboration and integration within ASEAN. There is a shared understanding of the urgent need to accelerate ASEAN’s integration efforts to make the region more attractive and competitive. He noted that discussions would take place on “further ways that ASEAN can work together to strengthen intra-ASEAN trade, and to send a strong signal of ASEAN’s commitment to regional economic integration.” He further emphasized that, as a group, ASEAN would continue to strengthen ties with like-minded partners in areas of mutual interest. 

Oceania has also been swept up in the tariffs. Even a group of barren, uninhabited volcanic islands near Antarctica—covered in glaciers and home to penguins—have been hit with a 10% tariff on goods. Norfolk Island, with a population of 2,188 people living 1,600 km northeast of Sydney, was hit with a 29% tariff. According to data from the Observatory of Economic Complexity, in 2023 Norfolk Island exported US$655,000 worth of goods to the US, with its main export being US$413,000 worth of leather footwear. However, George Plant, the administrator of the island, disputed the data, stating, “There are no known exports from Norfolk Island to the United States, and no tariffs or known non-tariff trade barriers on goods coming to Norfolk Island.”

A penguin soaks in the sun on rocks overlooking a glacier at Half Moon Island, Antarctica. (AP Photo/CP, John Nowlan)

Commenting on the situation, the Prime Minister of Australia, Anthony Albanese, remarked that he was not sure Norfolk Island—“with respect”—could be considered a trade competitor with the giant economy of the United States. He added that this “exemplifies the fact that nowhere on Earth is safe from this.” Even though Australia was hit with a relatively modest 10% tariff, it remains unfair, especially considering that Australia does not impose tariffs on US goods due to the preferential tariff arrangement under the current Australia–United States Free Trade Agreement (AUSFTA).

On 10 April, both New Zealand and Australia announced that they are each working with other nations on a possible joint response. Prime Minister Christopher Luxon of New Zealand said he had spoken with the leaders of Singapore, Vietnam, and Malaysia, as well as the head of the European Union’s executive, about international trade cooperation. Australian Foreign Minister Penny Wong stated, “There is a group of countries who see the benefit of free, open, and fair trade,” and added that government ministers had held discussions with Southeast Asian nations, Japan, Korea, India, and the EU about a coordinated response to Trump’s tariffs. Luxon spoke about the possibility of members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union working together to champion rules-based trade and make specific commitments on how that support would materialize in practice.