James Guild
When U.S. President Donald Trump unveiled his tariff plan to the world a few weeks ago, Southeast Asian countries were especially hard hit, with tariffs ranging from 18 percent on the Philippines to nearly 50 percent on Cambodia. Malaysia, Indonesia, Thailand, Vietnam, and Laos were looking at tariffs of between 24 and 48 percent.
ASEAN was seemingly treated more harshly than other regions because many of its member states run trade surpluses (in goods) with the United States, and Trump is obsessed with bilateral trade imbalances. Although the U.S. backed down within days, Trump’s wild ride does raise an interesting question: Why do so many countries in Southeast Asia run large trade surpluses, and is this actually a bad thing?
The simple answer is that countries in Southeast Asia run large trade surpluses because many have followed a model of economic development called export-oriented industrialization. One of the more reliable ways for an emerging market to accelerate economic growth is to manufacture things like textiles and electronics and then export them to foreign markets. Emerging markets can make these goods at lower cost because production inputs, such as labor, are generally lower than they are in the U.S. or Europe.
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