Goldman Sachs warns that the Trump tariff threat is not limited to China and will impact several Asian countries.

• Goldman Sachs predicts that higher tariffs on China may not be the only Asian country to face this issue following Donald Trump's victory in U.S. elections.
• Goldman stated that Asian trading partners may attempt to divert attention by importing more from the U.S. if possible.

Goldman Sachs predicts that higher tariffs on China may not be the only Asian country to face this issue following Donald Trump's victory in U.S. elections.

The decrease in the U.S. bilateral trade deficit with China since the Trump administration has been offset by a significant rise in deficits with other Asian exporters, which may face increased scrutiny, according to Goldman's Chief Asia-Pacific Economist Andrew Tilton in a recent note.

There is a risk that burgeoning bilateral deficits could eventually prompt U.S. tariffs on other Asian economies, as Trump and some likely appointees focus on reducing bilateral deficits in a "whack-a-mole" manner.

Imported goods are subject to a tariff, which is a tax paid by the importing country, not the exporting one. As a result, U.S. companies importing products will bear the cost of the tariff.

According to Tilton, Korea, Taiwan, and especially Vietnam have experienced significant trade growth compared to the U.S. He explained that Korea and Taiwan's advantages stem from their roles in the semiconductor supply chain, while Vietnam has benefited from the shift in trade away from China.

In 2023, South Korea's trade surplus with the United States reportedly hit a record $44.4 billion, making it the largest surplus with any country, with car exports accounting for almost 30% of all shipments to the U.S.

In the first quarter of 2024, Taiwan's exports to the United States reached a record high of $24.6 billion, up 57.9% from the same period the previous year, with the biggest growth in exports coming from information technology and audio-visual products.

The trade surplus between Vietnam and the U.S from January to September is $90 billion.

According to Goldman Sachs, both India and Japan have trade surpluses with the U.S., with Japan's surplus remaining stable and India's increasing moderately in recent years.

Tilton predicts that Asian trading partners may attempt to reduce their surpluses and divert attention by increasing imports to the U.S.

In his second term as U.S. president, Mr Trump's impact on Emerging Asia is likely to be most significant through trade policy, according to Barclays Bank analysts in a note dated Friday.

The economists led by Brian Tan at the bank predict that Trump's proposed tariffs will cause "greater pain" on more open economies in the region, with Taiwan being the most exposed to this threat compared to Korea or Singapore.

"Thailand and Malaysia are located in the middle, with Thailand projected to experience a slightly greater impact," the note stated.

In 2023, the U.S. trade deficit with China decreased to $279.11 billion from $346.83 billion in 2016.

Despite the decline in U.S. trade with China due to tariffs, trade volumes shifted to other countries such as Vietnam, Mexico, Indonesia, and Taiwan, according to Mari Pangestu, former minister of trade in Indonesia.

If you examine the supply chain, most of the components are still originating from China. This is referred to as elongating the supply chain. In Trump 2.0, two things will occur. Firstly, he will become aware that trade is still flowing to China, and secondly, he will start noticing this.

Pangestu stated that this measure would enhance protection not only against China but also towards countries with trade imbalances with the U.S.

Despite tariffs, Goldman anticipates ongoing pressure for shifting supply chains from China to Southeast Asia, India, or Mexico.

Trump has declared plans to impose a 10% to 20% tariff on all imports, with additional tariffs of 60% to 100% on products imported from China. Goldman predicts that the U.S. will impose additional tariffs of 20% on Chinese products in the first half of 2025.