Several Asia-Pacific economies could be on the U.S. radar for trade actions. S&P Global Ratings believes they check at least one of the boxes for "unfair trade" practices under the Trump administration's Fair and Reciprocal Plan.

The plan, released in a memorandum on Feb. 13, 2025, gives the U.S. a high degree of discretion and flexibility in interpreting "unfair practices". As such, the scope of economies that may be under scrutiny is wide.

But our assessment against the plan's key criteria suggests that several Asia-Pacific economies are vulnerable to tariffs--notably South Korea, Taiwan, India, Japan, Vietnam, and Thailand. Of these economies, Vietnam, Taiwan, Thailand, and South Korea have relatively greater economic exposure to the U.S, meaning that tariffs, if imposed, would have the largest economic impact.

Under the memorandum, the U.S. administration will identify a potential "reciprocal tariff" for each trading partner. There may be non-tariff measures as the memo notes "proposed remedies" for partners meeting stated criteria.

Our Screens Show Asia-Pacific Economies May Face Trade Measures

The U.S. said it could consider the following practices as "unfair and unbalanced":

• Tariffs imposed on U.S. goods.
• "Unfair, discriminatory or extraterritorial taxes" including value-added taxes.
• "Non-tariff barriers" and "burdensome regulatory requirements."
• Policies that "cause exchange rates to deviate from their market value."
• "Wage suppression"; and "Any other practice that … imposes any unfair limitation on market access or any structural impediment to fair competition" for the U.S.

In addition, partner economies that run a goods trade surplus with the U.S. are likely to draw attention for potential trade measures.

We focus on three criteria that we think would most likely sway the decision on imposing tariffs: bilateral trade surpluses, exchange rate policies and overall current account surpluses, and higher tariffs on U.S. products.

Most Asia-Pacific jurisdictions run trade surpluses with the U.S.

Chart 1

China had by far the largest at US$360 billion (not shown in chart 1 above), and others had sizable surpluses. However, New Zealand, the Philippines, Indonesia, and Malaysia had relatively small surpluses, which will not attract much attention. Singapore and Australia had goods trade deficits with the U.S.

Exchange rates and overall current account surpluses: Harder to justify

The U.S. Department of the Treasury monitors major trading partners exchange rate and other policies that could result in these partner economies getting an "unfair advantage over American workers." The latest semi-annual report in November by the U.S. Treasury on global foreign exchange policies noted that most foreign exchange interventions in recent quarters involved selling U.S. dollars to protect against depreciation of their currencies against the U.S. dollar; Treasury officials did not, consider this a form of "currency manipulation."

However, China, Japan, South Korea, Taiwan, Singapore and Vietnam were on the U.S. Treasury's Monitoring List for reasons not involving foreign-exchange intervention. China is on the list due to "broader lack of transparency around key features of its exchange rate mechanism." Moreover, China runs a large trade surplus with the U.S. Japan, South Korea, Taiwan, and Vietnam appear due to material overall current account surpluses and trade surpluses with the U.S.

Singapore appears to on the list due to foreign exchange interventions and a large overall current account surplus.

The U.S. administration is likely to place more scrutiny on economies on the Treasury's Monitoring List for "unbalanced trade" or exchange rate policy

Tariff rates: Korea and India stand out

Some places in the region levy significantly higher tariffs on U.S. products than the U.S. levies on their products. We expect these economies to be on under potential scrutiny for "reciprocal tariff action."

This is a tricky item to track because it's unclear at what level of disaggregation the U.S. administration will compare tariffs. And the outcomes could differ greatly depending on the level of detail applied.

For instance, some Asian economies have very high tariffs on certain agricultural products such as specific types of rice. As they hardly import any of that kind of rice, those tariffs don't really affect the effective (weighted average) tariff.

We look at (1) weighted average tariffs rates in Asia-Pacific economies on U.S. products, (2) U.S. tariffs on imports from the same economies; and (3) the differential between the two. These estimates of effective tariffs are a useful indicator to gauge import tariff imposition.

The results show India, followed by South Korea and Thailand might be most vulnerable to trade retaliation based on this criteria.

Effective tariffs between China and the U.S. have increased sharply since the start of trade frictions in 2018. Including the latest tariff escalation in February 2025, we estimate that U.S. weighted average tariffs on imports from China are about 25%, while China levies about 17% on U.S. imports. These are not shown on the chart below given the magnitude is much higher than the rest of Asia.

Chart 2

Which Economies May Be Most At Risk Of More Trade Measures?

The economies more likely to be face potential U.S. tariffs are:

• Vietnam runs a large trade surplus with the U.S., is on the Treasury's currency Monitoring List, and has a small tariff differential;
• South Korea has a sizable trade surplus, is on the currency Monitoring List, and appears to have a significant tariff differential;
• Taiwan has a sizable trade surplus, is on the currency Monitoring List, and has a small tariff differential;
• India has a moderate trade surplus, is not on the Monitoring List, and has a large tariff differential;
• Japan has a sizable trade surplus, is on the currency Monitoring List, and has a small tariff differential;
• Thailand has a moderate trade surplus, is not on the currency Monitoring List, and has a moderate tariff differential.

The magnitude of potential tariff measures is uncertain, and trade partners are likely to negotiate to obtain lighter measures. Negotiation avenues have so far included tariff reduction, more purchases of U.S. goods and services, direct investment into the U.S. to increase manufacturing capacity, and collaboration in other areas such as technology or immigration.

Tariff Pain Would Be Uneven

Where would the economic impact of U.S. tariffs, if imposed, be the largest?

We looked at the value-added produced in Asia-Pacific economies to meet final demand in the U.S. The exposure is shown as a percentage of the total value added in the economy (see chart 3).

On this measure, Vietnam has the largest reliance on exports to the U.S., with 12% of its economy reliant on U.S. demand, followed by Singapore (9%), and Taiwan (7%).

Chart 3

Given their greater economic exposure to the U.S., Vietnam, Taiwan, and Thailand would be affected more if U.S. tariffs were imposed. Korea's economy falls in the middle with moderate exposure to U.S. demand. India and Japan have more domestically oriented economies which will provide some mitigation from tariffs.

We View Trade Friction Risks As Significant

The new U.S. administration has already enacted additional 10% tariffs on imports from China and 25% tariffs on steel and aluminum. We believe this might not be the end of it.

Uncertainty is high because of the high leeway the U.S. administration gives itself in imposing trade tariffs on partner economies, and bilateral negotiations can impact outcomes as well.

However, several Asia-Pacific economies are under scrutiny and risks to economic activity loom. This will be especially relevant in a region that relies on smooth trade to drive growth.