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INTRODUCTION
ASEAN Wonk: Welcome to the ASEAN Wonk Podcast, where we bring you expert insights and regional perspectives on Southeast Asia and Indo-Pacific geopolitics and geoeconomics. I’m your host Dr. Prashanth Parameswaran. If you haven’t already, do subscribe to the ASEAN Wonk platform at www.aseanwonk.com so you don’t miss our full posts.
Our guest today is Edmund Sim, an international trade lawyer and former official who has advised nearly all of Southeast Asia’s governments on a range of subjects, including navigating regional free trade agreements and the entry of East Timor into ASEAN. We will start our conversation talking through ongoing geoeconomic dynamics, including the state of US trade policy. Be sure to stay tuned as we go through a range of other subjects, including the future inroads we might expect out to 2027 with respect to major powers and also within ASEAN in the regional organization’s geoeconomic agenda.
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FUTURE OUTLOOK ON US TRADE DEALS AND GEOECONOMIC DISRUPTION
ASEAN Wonk: So welcome to the podcast Ed and let’s start on some of the Southeast Asia dynamics with respect to US trade deals after the Supreme Court IEEPA ruling last month. Talking to Southeast Asian officials, they had already factored in the potential contingencies with respect to the Trump administration we might see. And as you’re aware, the Trump administration has also begun rolling out parts of what they’ve called a Plan B with various section authorities and so on. We’ve had a number of Southeast Asian countries sign trade agreements already – Cambodia, Indonesia, Malaysia – and a couple of others, including Vietnam are in the state of talks. As a trade lawyer and former official, what do you think we can expect on US policy in the coming months, and what are the datapoints you’re watching?
Edmund Sim: Well thanks for having me Prashanth. I think where we are is in a state of transition, albeit temporary, between what the Trump administration had proposed under the International Emergency Economic Powers Act, or IEEPA, and what we have now, which is under a different section of the law. The law in reference to the United States is the Trade Act of 1930. So they’ve resorted to using a section called 122, which deals with balance of payments issues, which historically were a bigger problem before the WTO (World Trade Organization) came into place. It’s under the General Agreements on Tariffs and Trade (GATT). So the president has this authority to impose tariffs of up to ten percent on a comprehensive basis on all imports, which he has done. And he has the authority to do that for 150 days. So we’re in that time period now. The issue and how this relates to the deals that were reached by the various Southeast Asian countries is that ten percent is, of course, less than what countries had negotiated with the Trump administration, ranging from eighteen percent to nineteen percent for most countries.
And it also affects countries that had no deal, like Singapore, which was at ten percent. And then now it potentially faces a higher duty because what’s happening is that right now, the duties are ten percent, but they want to reimpose rates that were negotiated with other countries. And so the administration is now working on a way to amend the ten percent in a way so that it applies to certain products from certain countries. And that might involve just pure amendment of this executive order that went into place previously. It may also involve applying a second executive order of up to fifteen percent. And so what you would have is the net effect of the two orders would impose ten percent for some products, for some countries, fifteen percent for others. So the net effect of all of this is to kind of get them to where they were before the Supreme Court ruling came out. But it’s not quite there. So under this authority that he does have under Section 122, he can’t really get the tariffs up all the way to the level that he had under IEEPA. So what that means is that countries that have already deals in place have to make a choice whether those countries press ahead or try to get some sort of renegotiation. If you’re a country that has eighteen percent, nineteen percent and you know fifteen percent is coming, you do face a choice theoretically of trying to delay implementation and just hoping that the fifteen percent would be what’s applicable rather than your eighteen percent or nineteen percent.
There are problems with this though. This Section 122 has a time limit. So they have until probably a hundred and fifty days after implementation to apply Section 122. And after, when you get to day 151, the president has to go back to the US Congress to get authorization to continue the tariffs beyond day 150. That’s one consideration, because the fifteen percent or ten percent as it may is a temporary situation. So what that means is that you don’t know what they’re going to do after day 151 if you’re one of the countries that have eighteen to nineteen. So whatever advantage you might have under the lower tariffs, it’s not going to be for that long. Second thing, of course, is that countries that go and try to renegotiate the terms could face potential negative blowback from the Trump administration, I think it’s difficult for some of the countries, particularly countries that were just before the Supreme Court ruling. Countries that had attended the Board of Peace meeting and everyone was supportive and all that, and then you turn around, you ask for a reduced rate. I think that wouldn’t go very well with the Trump administration.
“I think it’s difficult for some of the countries, particularly countries that were just before the Supreme Court ruling – countries that had attended the Board of Peace meeting and everyone was supportive and all that, and then you turn around, you ask for a reduced rate. I think that wouldn’t go very well with the Trump administration.”
And the third point is that we don’t know at this point exactly what type of permanent solution they’re going to have with regard to the U. S. law authorizing the tariffs. So they’re talking about using other sections of the law to impose the tariffs. So they’re talking about Section 232, which is national security, Section 301 for deals with trade barriers. And the president also mentioned Section 338, which is a very old section of the law, which dates back to over one hundred years. And the key thing about 338 is that it allows the president to post tariffs of up to fifty percent – five zero – against countries which have been deemed by the president to have discriminated against American products. So this has not been used in over one hundred years. It predates the World Trade Organization, the GATT. And so for that reason, it hasn’t been used. But it’s still on the books. And invoking that would mean a major shift away from international trade norms like most favored nation. But the potential is there for fifty percent. So unlike these other tariffs so you have a fifty percent potential authorization.
And under the Trade Act of 1930 authorizations, there’s no limit. So 232, he can impose higher rates above fifteen percent. And 301, he can impose rates above fifteen percent. So what all that means is that if you’re a country looking at the immediate implementation of the agreements that you’ve already reached or you’re almost going to reach, do you take what you already have or take a chance of what could happen? And given how the administration has changed the rates and has not been shy about adjusting the rates for purposes other than trade – so for example, the Cambodia-Thailand border dispute and the Trump administration used tariffs as a way to get them to the negotiating table – you have a situation where tariffs can be adjusted at any time, then there’s an understandably great reluctance to revisit those tariff rates.
So in the short term, I don’t see any of the countries in Southeast Asia knocking on the door and saying we would like to revise the rates. I think they’re going to stick with those deals. In the medium term, the longer term, the bigger issue besides the tariffs are all the other implementing conditions of these agreements. So for some countries, while all the countries agree to let in more American products at lower rates, that’s going to be problematic in some industrial sectors and agricultural sectors in Southeast Asia. You’re already seeing some pushback on ratification in countries such as Malaysia publicly and then not so publicly in Thailand and other places where there were very strong agrobusiness interests in those countries that don’t necessarily want to see American products come in. And there’s also the issue about signing up to other things such as the [Pax Silica] agreement or commitments to work in the supply chain.
And crucially, one of the biggest issues is this issue of transshipment. Because at the moment, these agreements all have commitments by the ASEAN states that signed up to prevent transshipment of goods from other countries – i. e China – from coming in and taking on the origin of the local country and then coming in under lower tariff rates. Because at the end of the day, really what a lot of this is aimed at is trying to “de-Sinoize” or reduce the China level of content in products coming into the United States. And so transshipped goods arguably are predominantly Chinese, and they’re really Chinese goods with a new coat of paint or a new mark saying they’re from Southeast Asia.
“Because at the end of the day, really what a lot of this is aimed at is trying to “de-Sinoize” or reduce the China level of content in products coming into the United States.”
The problem we have fundamentally, which has been raised by the ASEAN countries, is that the United States follows a legal approach to determining whether a product comes from China or some other country based on a pretty subjective legalistic approach called substantial transformation: you look at how the good is produced and what you do to process and then what comes out at the end of the production process. But in Southeast Asia and most of the world, like the ASEAN Trade in Goods Agreement (ATIGA), those rules of origin – the rules that assign nationality to a product – those are based on value added. And so it’s more objective because you’re looking at numerical cost information, price information; you’re not really looking at the processing involved. So there is a fundamental inconsistency between the U. S. approach and the rest of the world and Southeast Asia’s approach. And it’s been that way for years. And so how you bridge the gap between the two approaches is going to be very important in that point of view.
So that’s a medium-term problem. It’s going to have an immediate impact on countries that have taken on a lot of Chinese investment to manufacture goods with Chinese inputs. And so especially [Indochina] and to a lesser extent, Indonesia, have benefited a lot over the last seven to eight years from Chinese investment. And trying to adjust away from that is going to be a big issue. And so I think these are the short term and medium-term issues for all these governments in the region. It’s not just a matter of thinking that these changes will go away after a midterm election in November 2026 or go away after a new president comes in in early 2029. A lot of this stuff is going to stay. The U. S. government now has shifted its tax base to a great extent away from a primarily income tax-based system raising revenue to one of which a large percentage of the revenue is coming in from these tariffs. And so that’s not going away. That’s not going to go away with a change in the legislature. It’s not going away with a change in the presidency.
So it’s something everyone’s going have to live with because notably, the United States is one of the few countries in the world that does not have a national sales tax. Well, the tariffs that were imposed through Liberation Day under IEEPA and now under 122 and now and foreseeably under these other sections, that’s pretty much a sales tax. And so you have to think about the revenue generation point of view, not just from the foreign point of view or effects of trade. And so what that means is that in the region, you’re going to have to think about what the long-term effects are. You can’t assume that these are all going to go away in two or three years. They’re here to stay. In what form, in what manner, that’s an open question: what a new government would do or a new president would do regardless of party. So it’s not a matter of waiting it out and waiting for the weather to change, so to say. This is a fundamental change in the trade and investment climate with the United States.
WAYS TO MANAGE GEOECONOMIC RISKS BEYOND BUSINESS AS USUAL
ASEAN Wonk: Right. And just to situate ourselves, we’ve seen a number of datapoints coming out of the region as well. One of those, which we were talking about just before we started recording, is the first ever ASEAN geoeconomics report which we saw released. If you talk to officials that were involved in the drafting, they say this is a pretty significant datapoint in the region’s evolving geoeconomic landscape. The report notes the need for a decisive shift away from business and usual and not just managing short term risks just like you were talking about – accommodating the administration, signing short term deals – but also recognizing that this is a pretty fundamental shift and also one of many shifts that we’re seeing in the geopolitical and geoeconomic climate. And there’s also a need to do things like accelerate regional trade agreements, delivering on the many ambitious goals that ASEAN has talked about over several years, but there’s a lag in terms of actual implementation and monitoring. So you’ve written whole books about things like the ASEAN Economic Community and used to manage a blog on the ASEAN Economic Community which I and others read pretty assiduously. And you’re very familiar with these documents and the gap between rhetoric and reality. What are your takeaways are from the report and the climate in the region as opposed to the weather that you were talking about to capture the kind of moment this is for Southeast Asia and ASEAN?
Edmund Sim: Yeah. I think the report is important because it’s a product of the times. And so they specifically went out and named the United States revised trade policy as the instigator for this rethink of ASEAN trade and investment. And so if you read the report, a lot of the content is aimed at dealing with the changes in the US trade policy around the world. And so that’s a shift in ASEAN as an institution approach because traditionally, they haven’t been willing to name names or identify causes of the climate change, so to say, using this analogy. What is interesting is what is not said. So and again, this is from an American point of view, when you read it from that point of view and you read the report, what’s not said? Who’s not mentioned? Well, China is not mentioned. There’s no mention in there about how if you have to deal with the United States and you have to approach the United States in a different way and you have their concerns, there’s no mention very much about how to deal with China, how to deal with issues related to Chinese investment and trade in the region. And as I said in the previous comment, it is difficult because many industries have benefited from Chinese investment in trade. On the other hand, not everyone has. I mean a lot of the goods that were destined for the United States now are in Southeast Asia. So you have many industrial concerns in the region who are not happy with the increase of imports coming in from China. Yet there’s nothing in there directly naming names with regard to China.
Another country that’s not mentioned is India. There’s language in there talking about RCEP [Regional Comprehensive Economic Partnership], but as we know, India famously elected not to join RCEP. And there’s no language in the report about revisiting that, like whether it’s worth going back to talk to India about joining RCEP now that the conditions have changed. There’s been no mention about re-approaching India. And I think a lot of that has to do with Indian politics. But if you’re really looking at this as a long-term view, reconsidering an approach to India is important because they’re also a major player in the region. And the final part on who’s not mentioned is the European Union. I mean, Europe is a major investor in the region. It is a potential source of investment and trade. Several countries have free trade agreements with the EU, but the report doesn’t say anything about that. So in some ways, the geoeconomic report is important because it does break a bit from ASEAN’s traditional reluctance to name names and call out countries on policy. But on the other hand, there is a lot of it that’s still in the old approach of not singling out countries and not identifying countries.
So I think it’s a good thing. I think it does focus minds. The question is, does this focus ASEAN to look internally at how it operates in terms of implementation? So, from the internal ASEAN point of view, there was a lot of language in there, especially from the private sector. They know that they were talking about implementation. And what that means is that there are many, many ASEAN agreements dealing with aspects of the economy. The question is, are those agreements being implemented on the ground? Do you have effective ways to integrate into the single production base, single market that is contained as a goal in the ASEAN Charter? And this has been a longstanding complaint of the private sector – both foreign investment and local investors about making it easier to do business within the region. So in some ways, you still have internal competition at the regional level among countries – one industry against another country within ASEAN. And that competition historically creates non-tariff barriers – things such as [phytosanitary measures] for plants, health measures to prevent goods from crossing borders for agricultural products, industrial standards of barriers, other barriers. And ASEAN has gone, frankly, a long way to addressing some of those, but it takes a long time.
“There are many, many ASEAN agreements dealing with aspects of the economy. The question is, are those agreements being implemented on the ground?...And this has been a longstanding complaint of the private sector – both foreign investment and local investors about making it easier to do business within the region.”
And the thing mentioned briefly somewhat in the report is a need to increase not necessarily the power of the ASEAN institutions, but the effectiveness. It is not realistic to expect the ASEAN Secretariat to have the authority of the European Commission, despite the fact that that’s usually the comparison model that we always talk about. However, it is possible to improve the flow of information, the monitoring, the assessment. And one way I do think the report comes into play is that if ASEAN is willing to identify the United States as a cause of the climate change, is ASEAN willing to identify particular countries and particular industries within ASEAN as being necessary to deal with that climate change in terms of trade and investment? And I didn’t quite see that in the report, but that’s understandable because that’s been a major structural or cultural issue for ASEAN since the first concepts of dealing with the first economic crisis in the 1970s with the energy crisis and the commodities bust that we had in the 1970s that’s been a real sticking point in implementation. So that’s something that needs to be done.
Of course, I’m a lawyer. I would like them to address this through law. But I also understand ASEAN is a different kind of institution. Southeast Asia is different. It’s going to have to be a combination of law and policy. And it is something where both economic and other resources and power is going to have to be joined up with law to get us into a place where they can handle stresses within the market, stresses within the production base. Because if they don’t do that, then the ability of ASEAN is going to be hampered. The ability to deal with these climate changes with regard to the world investment and trade, that’s going to be hampered if they don’t get their act together. Because no one country in ASEAN – okay, you can argue that some countries are bigger than others – but fundamentally, all the countries are much better off working together through the ASEAN institutions than dealing with other trading partners such as the United States, such as China, EU, India. They’re much better off working together and rather than individually.
But you can’t work together unless you get your internal operations working in a more effective manner. And that’s something that has to be done. So it’s not like we’re talking about having complete flow of people across borders. That’s a very sensitive issue. But I do think they can make it easier for flow of money, flow of capital and investments, flow of people, of goods and making it so that it is easy to operate in the region. Because without that, it will be very difficult for the group to operate when you have internal competition and each one trying to outdo the other on bilateral deals with the trading partners. This is not going to work, and it goes against “ASEAN centrality.” It goes against what is the intended goal of the ASEAN Charter, which is to improve the welfare not just of the nation state, but also the people who live in those nation states in ASEAN.
TOP FUTURE GEOECONOMIC AGENDA ITEMS TO WATCH INTO 2027
ASEAN Wonk: Right. And that gets me to my next question, which is the follow through and what we might see the rest of 2026 and into 2027. There’s a lot of talk and conversation around this notion of understanding the world from more of a sort of G-Minus 2 prism – what other countries are doing in engaging Southeast Asia apart from the United States and China and vice-versa. There’s a gap between rhetoric and reality, but, in fairness, we’ve seen manifestations of this – Canada is working on a free trade pact with ASEAN which will have significant implications on North American geoeconomics, and Singapore and others have come up with FITP addressing sectoral areas like supply chains. There are also a number of intraregional geoeconomic agenda items like the Digital Economic Framework Agreement which will be quite significant once it is in place, and a number of other frameworks in area like artificial intelligence. What are some of the top priorities that governments and businesses that you talk to are watching in the geoeconomic agenda, not just for the rest of this year but also 2027? Because Singapore is going to be ASEAN chair that year, and Singapore has been very active in a number of these geoeconomic areas.
Edmund Sim: Yeah I think the….
[Note: This is the end of a free preview podcast, with the full version in an earlier post published on March 12, 2026 available to our paying subscribers. This is not meant to serve as new content and is part of our free preview content within the dedicated website podcast section].
