US tariffs to take centre stage as ASEAN meets in Malaysia

KUALA LUMPUR: Southeast Asian foreign ministers will meet on Wednesday as the region grapples with renewed uncertainty over U.S. trade tariffs and as a simmering territorial dispute between Thailand and Cambodia threatens to disrupt the bloc's unity.

AI Brief

ASEAN faces rising trade tension as the US imposes steep tariffs, prompting members to seek further negotiations.
China, Russia, and the US join talks in Kuala Lumpur, with foreign ministers addressing economic fragmentation and regional unity.
ASEAN grapples with internal disputes, Myanmars crisis, and South China Sea tensions while pushing for a nuclear weapons-free zone.

The gathering in Malaysia of the 10-member Association of Southeast Asian Nations will be followed by a flurry of meetings on Thursday and Friday between the group and its major trade partners, including the United States, China, Japan, Russia, India and the European Union.

China's Foreign Minister Wang Yi and Russian counterpart Sergei Lavrov are expected to join the Kuala Lumpur meetings, as will U.S. Secretary of State Marco Rubio, who makes his first trip to Asia looking to smooth over relations with allies and partners rattled by President Donald Trump's tariff strategy.

Trump on Monday announced hefty levies of between 25% and 40% on six Southeast Asian countries, despite concerted efforts by some to offer broad concessions and negotiate lower rates.

The export-reliant ASEAN is collectively the world's fifth-biggest economy, with some members beneficiaries of supply chain realignments from China. Only Vietnam has secured a deal, which lowers the levy to 20% from 46% initially.

Indonesia, Thailand and Malaysia said they would seek further talks ahead of the tariff implementation on August 1.

TARIFFS 'COUNTERPRODUCTIVE'

ASEAN foreign ministers will express "concern over rising global trade tensions and growing uncertainties in the international economic landscape, particularly the unilateral actions relating to tariffs," according to a draft joint communique seen by Reuters.

The draft, dated July 7 and before the latest tariff rates were announced, did not mention the United States and used language similar to an ASEAN leaders' statement in May. Both said tariffs were "counterproductive and risk exacerbating global economic fragmentation".

The bloc in April said it would not impose retaliatory measures and its leaders have pledged any bilateral deals they strike with Washington would not harm fellow ASEAN members.

OCBC senior ASEAN economist Lavanya Ventakeswaran said countries including Vietnam face additional uncertainty over tariffs targeting transshipments, a measure aimed at products largely from China, with questions remaining over enforcement and implementation.

"The bottom line is that it's going to be quite complicated moving forward," Ventakeswaran said.

The issue has also been complicated by Trump's initial threat of an additional 10% on tariffs on countries aligned with the BRICS grouping. Indonesia is a member, while Malaysia, Thailand and Vietnam are partner countries.

ASEAN will promote a treaty on a nuclear weapons-free zone in Southeast Asia and the meeting could also see Thailand and Cambodia seek to ease a dispute that led to a mobilisation of their troops at their border and a crisis for a Thai government now hanging by a thread.

Thai Prime Minister Paetongtarn Shinawatra has since been suspended pending a court case over her leaked phone call with Cambodia's influential former leader, Hun Sen, a conversation her opponents say undermined Thailand's sovereignty and integrity.

The dispute puts more pressure on ASEAN to maintain a united front, amid other unresolved issues including an intensifying civil war in Myanmar and a protracted drafting of a code of conduct with Beijing for the South China Sea, a key source of geopolitical tension.