As of Wednesday 2nd April, 2025, the American President, Donald.J. Trump announced tariffs globally against countries he accuses of benefitting off what he calls American clemency and the ineptitude of the previous administration. In his attempt to usher in a “Golden Age for America” he has announced a broad range of tariffs with particular force being applied to China and Vietnam who have been slapped with 34% and 46% respectively in “discounted reciprocal tariffs. Of worthy note is Cambodia who has equally been hit with a 49% tariff. It should be noted that these tariffs aren’t actually based on actual existent tariffs by said nations but trade deficits divided by actual imports as seen in World Trade Organisation data.
These tariffs are clearly meant to pull American manufacturers utilising low tax and low labour cost jurisdictions to maximise output away from South East Asia to invest in domestic manufacturing and create local jobs as promised by Trump on the campaign trail.
However, none of these promises consider the reality that American manufacturing is often costly as compared to international manufacturing due to higher labour costs in the USA and taxation that pushes American companies to manufacture in South East Asia.
Imagine an American company, let’s call it “TreadsCo,” that makes sneakers. In the U.S., they’d have to pay workers at least $15 an hour (or more, depending on the state) to stitch the shoes, assemble the soles, and package them. That’s because of minimum wage laws and higher living costs. Plus, they’d deal with expensive rent for a factory, strict environmental rules that add costs (like waste disposal fees), and taxes that take a bigger bite out of profits.
Now, picture TreadsCo setting up in Vietnam. There, they might pay workers $5 to $8 an hour because wages are much lower, tied to the local cost of living. The factory rent is cheaper—maybe a tenth of what it’d cost in a U.S. city—and Vietnam’s government offers tax breaks to attract foreign companies. On top of that, regulations on things like emissions or labor conditions are looser, so TreadsCo spends less on compliance. Even after shipping the sneakers back to the U.S., the total cost per pair could drop from, say, $45 to make in the U.S. to $17 in Vietnam. That’s a big savings, especially when they’re churning out millions of pairs to sell at stores like Walmart or Costco.
So, for TreadsCo, Vietnam’s lower labor costs, cheaper facilities, and friendlier business rules make it a no-brainer to manufacture there instead of at home.
Companies cannot abruptly disrupt supply and production chains from which they greatly benefit in terms of reduced cost and therefore, the end consumer carries the increased cost that the manufacturer incurs in tariff barriers.
Trump sees himself embodying the late 19th Century President, McKinley who famously placed wide ranging tariffs on international trade which favoured a nascent industrialising American economy but ignores modern day contexts.
Even McKinley, a pioneer of American protectionism, realized later in his Presidency that high tariffs weren’t perfect. In 1901, he started pushing for trade deals to lower some tariffs and boost exports. He got assassinated before he could do much, but it shows he saw limits. Trump, though, seems all-in on tariffs without that flexibility(premised on a faux sense of American global domination) which could box him in if things go south.
Trump’s McKinley-style protectionism might sound like a bold “America First” move, but it’s a gamble. It will jack up prices, shock and agitate trade partners, and not deliver the job boom he promises—all while ignoring how much the world has changed since 1890. It’s like trying to use a horse and cart fix in a rocket-ship age (which equally relies on global supply chains to acquire rare earth metals like neodymium used to make particular magnets from states like China).
Nations like China and Vietnam can very much rely on their own trade ecosystems to maintain robust trade. The USA cannot simply push them into a position that favours the USA. According to Nikkei Asia and Statista.com, China’s trade with Southeast Asia (ASEAN) surpasses its trade with the US. In 2022, China-ASEAN goods trade reached $722 billion, accounting for nearly one-fifth of ASEAN’s global trade. By 2023, Chinese exports to ASEAN were valued at $523.7 billion.
This dynamic shows a healthy interdependence amongst South East Asian economies outside US Trade.
Trump’s tariffs only hurt American consumers in the long-term who rely on goods produced by American companies that outsource some manufacturing components from China, Vietnam and Cambodia. This is especially in the textile and automotive industry.
If critically analysed, Trump’s use of tariffs as a weapon is not a smart move in a trade sense and will disrupt global chain supply on top of affecting the U.S itself with a risk of plunging it to a resccession. The Wall Street Journal editorial branded the move as “the Dumbest Trade War in History.” Thus, it can be argued that Trump overates the US’ position in the grand calculus of global trade with the only reality being a potentially high cost of living forthcoming for the ordinary American. To sum it up, perhaps quoting former Canadian Prime Minister Justin Trudeau response to Trump’s use of tariffs against countries can explain this; “it’s not in my habit to agree with the Wall Street Journal, but Donald, they point out that even though you’re a very smart guy, this is a very dumb thing to do.”
The writer is a research fellow at the Development Watch Centre.