Is Asia on to something?

The glory days of supply chains must seem like a prehistoric time to the countries that lined up to concede to White House demands for levies. It is certainly a throw-back to an earlier, less prosperous, age: The overall level of US tariffs is now the highest since 1930s, according to Bloomberg Economics. Japanese Prime Minister Shigeru Ishiba was once adamant he would never accept duties, especially on automobiles, but concluded he could live with a 15% penalty. The EU’s top official, Ursula von der Leyen, on Sunday said the 15% rate the bloc settled on with US President Donald Trump was the best she could manage.

Key economies yet to strike a deal, such as South Korea and India, risk more adverse terms than those that already went along to get along. 

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Trump is demanding a demonstration of obeisance and, in important ways, is receiving it. At the top of the commercial food chain is the US, still the premier economy by a healthy margin. Import tariffs may not revive the working-class communities that he claims to champion, but Trump can put on an emotionally satisfying show. And the nations that have yielded get Trump off their back—and cross their fingers that they will fare better under the next president. 

In this sense, it’s useful to think in terms of apex predators, those at the pinnacle of the natural food chain that are able to devour smaller players, according to Dmitry Grozoubinski, a former Australian trade negotiator. “They are to a large extent paying protection money,” he told me. 

Tariffs of around 20% seem to be the benchmark for Southeast Asia, based on deals announced with the Philippines, Indonesia and Vietnam. In the case of the latter two, they negotiated the US down from higher levels than foreshadowed in April. They will still hurt. Efforts to squeeze China are a feature of the pacts; Washington wants to curb the ability of Chinese firms to re-route products through third countries. The Philippines appeared to suffer a humiliation; the levy on goods from the archipelago was just a hair lower than what was announced by Trump a few weeks ago.

Many details are still to be resolved and countries haven’t given up on getting better terms. The common element, aside from just getting what passes as a deal done, is allowing Trump some of the theatre he craves. Praise the agreements and the White House’s occupant. 

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And, perhaps, when the attention is elsewhere, you can get a slightly better deal. Philippines President Ferdinand Marcos Jr. made it clear he hasn’t given up. Ahead of his recent meeting with Trump at the White House, his team put great store in the close historical ties between the two nations; the Philippines was once a US colony and it regularly brushes up against Chinese ships in the South China Sea. 

On the face of it, Manila got little from the arrangement. Marcos’ best shot is to work with negotiators while Trump has moved on. Pentagon chief Pete Hegseth hinted at this by saying there may be a military component to the accord.

“The wolf is now at other doors,” said Grozoubinski, author of the book Why Politicians Lie About Trade. “The indignity hurts less than the fight would.” In return, counterparts get a semblance of certainty about the cost of entry to the US, a vital component in the competition for foreign direct investment. 

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The escape can be a form of victory. In Vietnam’s case, the country is still fairly competitive with a 20% tariff. It stings, but probably isn’t enough to warrant a producer packing up and going somewhere else. It may all be worth it to keep access to US customers. The administration foreshadowed this calculus before ‘Liberation Day.’ Stephen Miran, chair of Trump’s Council of Economic Advisers, told Bloomberg Television in March that nations have little choice other than to sell to the US. They will pay up to retain that privilege. 

Seoul and New Delhi are next. Korean officials have dangled a shipbuilding partnership as part of a potential compact. Talks with China, underway in Sweden, will be something else. 

Hopefully, the world economy won’t be too damaged. The question Chinese President Xi Jinping will ask is whether the fight is worth it and how much resistance his own economy can stand. The David Attenborough documentary on that one will be compulsory viewing.  ©Bloomberg

The author is a Bloomberg Opinion columnist covering Asian economies.