Trump Tariff Deadline Spurs Asia Export Surge, Wider Trade Gaps
The US trade deficit with Asia is widening as importers stock up ahead of President Donald Trump’s “reciprocal” tariffs deadline.
Vietnam, Taiwan and Thailand all reported record exports to the US in May, according to data released in the past few weeks. South Korean shipments were near a record last month and look to have grown again in early June, data released on Monday showed.
Those highs flip the normal historical pattern, where trade is stronger in the latter part of the year as Asian suppliers ship to the US ahead of Christmas holidays. The threat of new US tariffs starting in early July is forcing companies to get goods onto vessels and to the US as quickly as possible.
Shipments from Vietnam and Thailand to the US both jumped 35% in May from a year earlier, while Taiwanese exports soared almost 90%. Those historic gains are likely to start showing up in the US data this week, when May data is released, and could complicate negotiations between Trump and economies across the region on the level of tariff the US will set.
The US trade deficit has blown out this year as firms try to deal with the sudden changes to Washington’s tariff and trade policy. While a sharp rise in pharmaceutical imports from Europe has contributed to the shortfall, Asian nations are the largest single contributor to the gap.
The forecast is for the US trade deficit to have been $91 billion in May, enough to take it to almost $643 billion so far in 2025 — well beyond the previous record for this stage of the year set during the pandemic.
If Trump imposes historically high duties on countries across Asia in early July as he is threatening to do, that surge in exports could quickly reverse, undermining economic growth across the region.
Last month, the Asia-Pacific Economic Cooperation organization slashed its forecast for GDP growth this year due to the trade tensions, with the economies of the 21 members seen expanding 2.6%, lower than the 3.3% forecast in March.
The policy volatility is already impacting trade with China, which saw shipments to the US drop in May, despite a tariff truce agreed in Geneva mid-month. Yet that might not be the whole picture: Even with the tariff reductions agreed in that deal, US import taxes are still at high levels, pushing some exporters to channel products via third economies in a process known as origin washing.
Chinese firms are also trying to shift their exports to other markets legitimately and sell more at home. Any sustained drop-off in exports risks undermining economic growth in China, which has been increasingly dependent on foreign demand to counteract the drag from a property slump and weak domestic consumption.
Other nations in Asia might start seeing a similar hit to their growth appearing soon if they can’t reach a deal with the US and escape hefty hikes in tariffs.
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