Alexandra Stevenson
Concern is increasing throughout Southeast Asia as U.S. officials, intent on slowing China, have yet to say how they will define the origin country of imports.
While the origin of this electric vehicle on a Chinese assembly line may be clear, global supply chains make the origin of many products difficult to determine, especially in Southeast Asia. Credit...Gilles Sabrié for The New York Times
Alexandra Stevenson, who has traveled throughout Southeast Asia this year covering trade, reported from Hong Kong.
For months, companies and officials throughout Asia have been waiting for President Trump to address a question that cuts to the heart of his disruptive plans for global trade.
How do you decide the origin of goods in a world where virtually all the things we buy, from computers and phones to sofas and cars, contain parts that come from different countries?
The answer is central to Mr. Trump’s aim to reduce China’s dominant role as the starting point for many of the world’s manufactured goods.
“It’s a sleeper issue,” said Wendy Cutler, a senior vice president at the Asia Society Policy Institute, a think tank. “People are trying to convince themselves that it is just technical, but if you take a step back, it’s all going to rest on this.”
No other region is more exposed to Mr. Trump’s crackdown than Southeast Asia. Billions of dollars a year in raw materials, machinery and finished goods flow from China through Vietnam, Thailand, Malaysia and other countries across the region.
Ahead of Mr. Trump visit to Asia this week, his trade officials have met with negotiators for other countries to try to reach agreements. But whether any prospective deals will contain details that address how Mr. Trump wants to define the nationality of goods is still up in the air.
The determination that the Trump administration makes on the so-called rule of origin could blow up laboriously negotiated agreements. That is because if a product is shipped from one country but does not meet the origin criteria, it will be hit with a hefty special tariff, which Mr. Trump has warned will be 40 percent.
This summer, Mr. Trump, pulling back on his opening salvo of sky-high tariffs in Asia, announced frameworks for most Southeast Asia countries with across-the-board tariffs that settled at 19 or 20 percent.
A pet food factory in Bangkok. Billions of dollars in Chinese products flow through Thailand and other countries in the region every year.Credit...Rebecca Conway for The New York Times
Mr. Trump’s trade legacy in his first term was to force companies to set up factories outside China. Now, he is trying to cut China out of supply chains. China has moved goods through Southeast Asia to circumvent American tariffs and has been the source of a swell of exports to the region, much of those in machinery and raw materials that regional factories depend on.
Many of the components in the things that are made around the world come from China, from the screws and glue that hold metal and wood together to the minerals in smartphone batteries.
Yet even in Malaysia, where signing a deal with Mr. Trump would be seen as a positive development, there is some hesitancy about the unilateral way that the United States is going about setting new rules for global trade.
Malaysia’s biggest trading partner is China, but one of its biggest industries, semiconductors, depends heavily on the American market, and its exports are at risk with the possibility of separate sector tariffs.
“All we can do is express our concerns — hopefully, they are listening to the confusion,” said Siobhan Das, chief executive of AmCham Malaysia, which represents American companies in Malaysia. “With this trade agreement, what we’re hoping for is that there is clarity and a guideline for how supply chains need to move.”
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