Asia’s Trade Surplus with the US: A Growing Concern
The recent election outcome in the US has brought attention to the potential imposition of higher tariffs on China. However, experts warn that other Asian countries may also face scrutiny due to their growing trade surpluses with the US.
Rising Deficits with Other Asian Exporters
According to Goldman Sachs, while the US bilateral trade deficit with China has decreased somewhat, deficits with other Asian exporters have risen significantly. This trend may prompt the US to impose tariffs on other Asian economies, similar to the “whack-a-mole” approach.
Korea, Taiwan, and Vietnam: The New Focus
Korea, Taiwan, and Vietnam have seen large trade gains versus the US, with Korea and Taiwan benefiting from their positions in the semiconductor supply chain, and Vietnam reaping the benefits of redirected trade from China. In 2023, South Korea’s trade surplus with the US reached a record $44.4 billion, while Taiwan’s exports to the US hit a record high of $24.6 billion in the first quarter of 2024. Vietnam’s trade surplus with the US stands at $90 billion between January and September.
India and Japan: Also Running Trade Surpluses
India and Japan also run trade surpluses with the US, with Japan’s surplus remaining relatively stable and India’s increasing moderately in recent years.
Deflecting Attention
Going forward, these Asian trading partners might try to lower their surpluses and deflect attention by shifting imports towards the US where possible.
Trade Policy: A Key Concern for Emerging Asia
Barclays Bank analysts believe that trade policy will be a crucial area where the US president-elect will have a significant impact on Emerging Asia in his second term. The proposed tariffs are likely to inflict greater pain on more open economies in the region, with Taiwan more exposed to that threat than Korea or Singapore.
The US Trade Deficit with China: A Narrowing Gap
US data shows that the US trade deficit with China narrowed to $279.11 billion in 2023, from $346.83 billion in 2016. Although US trade with China dwindled following the implementation of tariffs, trade volumes were channeled to third countries instead, such as Vietnam, Mexico, Indonesia, and Taiwan.
The Future of Supply Chains
Regardless of tariffs, Goldman expects continued pressure for the relocation of certain supply chains from China to Southeast Asia, India, or Mexico. The US president-elect has announced his intention to impose a blanket tariff ranging from 10% to 20% on all imports, along with additional tariffs of 60% to 100% on products imported from China.
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