U.S. President Donald Trump signs historic trade agreements with Southeast Asian leaders, focusing on rare earths and industrial cooperation (Photo: Pinterest)
Donald Trump’s recent trade tour of Southeast Asia saw a hasty evolution of the trade landscape already being reshaped in the U.S. administration's view. On Sunday, opportunities for trade contracts and memoranda of agreement were signed between Trump and several other Southeast Asian nations such as Malaysia, Thailand, Cambodia and Vietnam.
These agreements have been made largely in conjunction with the United States resource development interest in this area, particularly in light of the ongoing trade dispute with China and efforts to counter China’s dominance over access to strategic materials like rare earths.
Trump’s visit was to underline the importance of rare earth minerals and greater access to them. Given the current monopoly position of China with respect to trade in these strategic materials so critical for globally strategic industries like electronics, automotive and defense, the U.S. has been working consciously to shed off the dependence on the harsh monopoly that China represents.
With the new accord, it is hoped the U.S. will diversify its supply chains and cooperate with Southeast Asia with greater intensity. The memoranda relating to cooperation for enhancing exploration, mining and development of rare earth resources were signed with Malaysia and Thailand.
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The agreements signed do not go into too much detail but they represent a symbol of growing collaboration with the Malaysians said they would give the U.S. preferential access to rare earths and also push for the rapid development of these resources with American partners. Cambodia similarly pledged to do the same. This is amid growing unease over China’s virtual monopoly over these materials.
The agreement that Trump signed with Malaysia includes a sizeable provision for industrial goods, giving U.S. exports preferential market access including vehicles and agricultural products. The agreement also lays the ground for the purchase of 30 airplanes made by Boeing, with an option for a further 30 planes among other U.S. aerospace and data center equipment. The whole commitment inclusive of a pledge to invest $70 million over the next ten years in the U.S. is estimated to be worth $150 billion.
The most contentious issues remains unresolved semiconductors and tariff agreements have not been reached, and this continues to be an enormous impediment, given that Malaysia is the sixth-largest producer of semiconductors in the world. Now the canceled agreements on tariffs on such important exports remain a big hurdle for the two countries. Financial analysts like Michael Wan of MUFG would mention that the uncertainties surrounding semiconductor tariffs will continue complicating Malaysia's trade relations, as semiconductors constitute a major share of its export.
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In agreement with Malaysia, the trade deal made by Cambodia with the United States focuses on rare earth minerals and energy resources. Tariffs on goods exported from the United States to Cambodia of 19 percent remain imposed, but Cambodia has now agreed to zero tariffs on exports from the United States and to facilitate U.S. investment in its critical minerals industry.
This setup underscores U.S. strategic interest in tapping into Southeast Asia's natural resources while trying to cement stronger bilateral ties with countries that several times find themselves caught in the web of rivalry emerging from the U.S.-China dichotomy.
Vietnam was also a major player in these trade talks in July, Vietnam had already succeeded in reducing U.S. tariffs from 46 percent to 20 percent, which prevented a potential trade crisis. The new framework agreement signed during Trump's visit maintains this reduced tariff rate but adds provisions for zero tariffs on selected goods with further details to be finalized very soon.
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Vietnam further agreed to expand its purchases of U.S. agricultural commodities worth over $2.9 billion and to purchase 50 aircraft from Boeing with a value of around $8 billion.
Trump signed with Thailand aimed to strengthen bilateral economic relations nearly finalized in the next few weeks, Thai goods would be exempt from the hefty 19 percent tariff in exchange for Thailand, eliminating almost all duties on exports from the U.S.
This agreement also includes significant purchases in the aerospace and energy sectors where Thailand is committed to acquiring 80 U.S. aircraft to the tune of approximately $18.8 billion. This represents a huge step forward in enhancing the relations between the two countries in defense and aerospace.
Trump's trade agreements with Southeast Asia reflect a larger change in the U.S. foreign policy toward the region. Even as those Southeast Asian nations face growing Chinese influence, they are endeavoring to balance their ties to Beijing with stronger linkages to Washington.
While this trade arrangement presents opportunities for increased cooperation, the question remains whether it may be too little in the face of China's deep economic entrenchment in the region. In the coming years, the actual ramifications of these agreements will be revealed as the U.S. negotiates these treacherous trade dynamics in concert with Southeast Asia.
Disclaimer: This article summarizes recent trade agreements signed by President Trump during his visit to Southeast Asia. All claims are based on official reports.
