Why tariffs aren’t the biggest factor holding back US-Asean trade

2026.03.18 14:50 US President Donald Trump (left) and Malaysia’s Prime Minister Anwar Ibrahim hold up signed documents on a trade deal in Kuala Lumpur on October 26, 2025. Photo: AFP When the Trump administration rolled out sweeping tariffs on “Liberation Day” in April 2025, the reaction across Southeast Asia was swift: markets dipped, supply chains scrambled and governments went into damage control. Governments had a choice: retaliate or negotiate. They negotiated. Southeast Asian countries including Indonesia, Malaysia and Cambodia have signed Agreements on Reciprocal Trade with the United States. Those deals lowered tariffs from their peak levels and opened market access for US exports. Then in February, the US Supreme Court rejected the Trump administration’s blanket tariff approach under the International Emergency Economic Powers Act, adding yet another twist to the tariff story. That said, here is a reality check: in Southeast Asia, tariffs were never the main obstacle for American business. Non-tariff barriers are. If you’re an American company trying to operate in countries in the Association of Southeast Asian Nations (Asean) – the fourth-largest trading partner of the US, with more than US$500 billion in annual two-way trade – tariffs are usually just a line item. You price them in. What you cannot easily price in are shifting regulations, customs procedures, duplicative approvals and opaque licensing systems. These don’t grab headlines. They just kill deals. For instance, take Indonesia’s local content requirements. To sell most products there, companies must produce 35 to 50 per cent of components locally. Supporting domestic industry is a fair goal, but in practice the rule often blocks companies entirely. A US pharmaceutical firm might invest to manufacture one drug locally yet still be barred from selling the rest of its portfolio. That limits business opportunity and reduces access to new medicines for Indonesian patients. In Malaysia, complex halal

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