Yang Berhormat Liew Chin Tong, Deputy Minister of Investment, Trade and Industry, Malaysia

 

Bapak Nurul Ichwan, Deputy Minister for Investment Promotion, Indonesia

 

Prof Tirta Nugraha Mursitama, Deputy Minister for Investment Cooperation, Indonesia 

 

Excellencies,

 

Ladies and Gentlemen, Business Leaders

 

1. Good morning to all of you. First, let me thank Mr S.S. Teo, Chairman of Singapore Business Federation for inviting me to this year’s edition of the ASEAN Conference.

 

2. The ASEAN Conference is an important platform for Government leaders and business leaders to exchange views and ideas on how we can build a stronger and more resilient ASEAN. 

 

3. This objective has taken on greater significance and urgency in recent months, given the heightened policy uncertainty and increased trade barriers. 

 

4. We have just heard the announcement of the trade deal between Vietnam and the US. All of us are eagerly waiting for the outcome of the US’ negotiations with the rest of its key trading partners over its ‘reciprocal tariffs’. But beyond the tariffs per se, it is important to reflect on what the US’ intentions are, how ASEAN is responding to these policy shifts, and the implications for businesses. 

 

5. Let me start with the US’ intentions. 

 

6. First, the US wants fair and balanced trade with the rest of the world. 

 

a. In its view, fair trade means reducing or eliminating its trade deficit in goods – which amounted to a record US$1.2 trillion in 2024. 

 

b. This is why in its negotiations with countries on the ‘reciprocal tariffs’, the US has asked these countries to buy more goods from the US, such as energy products and agricultural produce. 

 

c. That does not mean the US is not concerned about free trade, or more specifically, trade barriers against its exports – in fact, the US is also looking to address non-tariff measures in these discussions, such as standards, testing and certification requirements, and sanitary and phytosanitary requirements. 

 

7. Second, the US wants to reshore or nearshore domestic production in key industries which it views as critical to its national and economic security; these include steel, pharmaceuticals and semiconductors. 

 

a. This is the objective of its product specific tariffs – more specifically, 50% on steel and aluminium; and 25% on auto and auto-parts. 

 

b. It has also signalled that it may introduce other sectoral tariffs, such as on semiconductors and pharmaceuticals. 

 

8. The US is also looking to secure the supply chains of these imports, in particular on where the materials for these products come from, and who owns the production facilities.

 

a. For example, in its Economic Prosperity Deal with the UK, the US agreed to negotiate significantly preferential treatment outcomes on pharmaceutical and pharmaceutical ingredients, subject to the UK complying to its security requirements on its supply chains. 

 

9. Third, the US has not yet given up on the multilateral trading system. 

 

a. Unlike the Paris Accords, the US has not pulled out of the World Trade Organisation (WTO) – in fact, its Trade Representative Jamieson Greer attended the WTO Informal Ministerial Gathering at Paris last month. It has also nominated former trade lawyer Joseph Barloon to serve as the US representative at the WTO, pending Senate confirmation. 

 

b. That said, the US is of the view that the WTO has not been effective in addressing issues such as non-market practices and overcapacity.

 

c. The US has also not yet said how it thinks the WTO should be reformed, although it is likely that the US is seeking changes in line with its “America First Trade Policy”. 

 

10. Let me now touch on how ASEAN is responding. 

 

11. ASEAN wants to engage in frank and constructive discussions with the US to address trade-related concerns. We have also decided not to impose any retaliatory measures in response to the US’ tariffs, because we believe that such actions will be counter-productive and will add costs to our businesses. 

 

12. At the same time, we want to open up more opportunities for growth, as well as to build a more resilient ASEAN economic community. 

 

13. First, by deepening our economic integration within ASEAN. 

 

a. We recently concluded negotiations on the upgrade of the ASEAN Trade in Goods Agreement (ATIGA). Besides further liberalisation of tariff lines, the ATIGA upgrade will enhance our collective commitments on non-tariff measures, as well as improve trade facilitation and transparency on areas such as customs procedures. 

 

b. Negotiations on the ASEAN Digital Economy Framework Agreement (DEFA) are currently underway, and targeted for substantial conclusion by the end of this year. By aligning digital rules and standards and promoting inter-operability of digital systems such as digital identities and payment systems, we hope that the DEFA will enhance cross-border digital trade within ASEAN. 

 

14. Second, by broadening our collaborations with our partners and other trading groups. 

 

a. At the recent ASEAN Summit in late May, we agreed to deepen our economic relations with the Gulf Cooperation Council (GCC), including the possibility of an FTA between ASEAN and the GCC. 

 

b. We are also working on a dialogue between ASEAN and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which we hope will pave the way for ASEAN and the CPTPP to collaborate on areas of mutual interest, such as the digital economy, trade facilitation and supply chain resilience. 

 

c. And together with our dialogue partners such as Australia and New Zealand, China, and Japan, we are exploring how to enhance and expand the Regional Comprehensive Economic Partnership (RCEP). 

 

15. Third, by strengthening the rules-based, multilateral trading system, with the WTO at its core. 

 

a. Without a rules-based global trading system – and in particular the assurance that global trade will continue to be conducted on free, fair and non-discriminatory basis – we risk being at the mercy of larger economies that possess stronger levers on the account of their market size. 

 

b. This is why the WTO remains an important institution and foundation on which to build a better global, rules-based trade architecture. 

 

c. While the system is not perfect, we should not abandon it; instead, ASEAN is committed to working together to strengthen the WTO and the global, rules-based trading system. 

 

16. Finally, let me touch on what this means for our businesses. 

 

17. First, businesses must be prepared that exports to the US will cost more. 

 

a. We cannot bank on the possibility that the tariffs will go away after four years with a different US administration. 

 

b. There is growing bipartisan consensus within the US on the use of tariffs to achieve fair and balanced trade with the world, as well as to ‘reshore’ or ‘near-shore’ critical industries. 

 

c. While many businesses are currently pushing back against the new tariffs, once they have invested in the US, their incentive will be to ensure that these tariffs stay in place to protect their investments. 

 

d. And given the rising fiscal deficit, tariffs will increasingly be an important source of tax revenue for the US government. 

 

e. So we must be prepared that the US’ tariffs will be here to stay, and therefore exports to the US will cost more for some time. 

 

18. Second, businesses must be prepared for greater scrutiny over their production and supply chains, and even to set up separate lines for exports to the US vis-à-vis the rest of the world. 

 

a. Like its tariffs, the US’ economic security concerns will not go away anytime soon, especially over what it deems as critical industries. 

 

b. If the US-UK Economic Prosperity Deal is anything to go by, the US will likely extend preferential tariffs to imports of such products from other countries under similar security-related conditions. 

 

c. To benefit from lower tariffs – especially in sectors such as steel, autos and in time to come, pharmaceuticals – companies must be prepared to meet the US’ conditions over their production and supply chains, even if these requirements come at a much higher cost. 

 

d. Even if they do not export directly to the US, companies which sell materials or components which are used by businesses in other countries that export to the US must also expect similar requirements to be placed on them. 

 

19. Third, in addition to differentiating their production and supply chains, companies must diversify into new markets and even new products and services. 

 

a. There is a concerted effort among like-minded partners to preserve an open global trade environment, but we must be prepared for a more protectionist landscape ahead of us. 

 

b. At the same time, as we deepen our integration within ASEAN and broaden our engagement with other like-minded partners, there will be new opportunities in new areas such as the digital economy and in new markets. 

 

c. The reshuffling of production and supply chains will also open up new business opportunities. 

 

d. So even as we have to deal with the immediate challenges, I urge businesses to think of what opportunities lie in the next bound, and to let us know how we can support you to reposition yourselves in the new economic landscape. 

 

20. By working together, I believe we can secure a brighter and more resilient future for our region, our businesses, our economies as well as our people. 

 

21. Thank you. I look forward to the dialogue with my fellow economic ministers from Malaysia and Indonesia.