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Tariff rates sharply down from levies threatened in April

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Businesses, governments say similar rates ensure

competitiveness

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Southeast Asia reliant on exports, US its major market

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Status of trade deals unclear, scope for more talks

By Chayut Setboonsarng, Martin Petty and Huey Mun Leong

BANGKOK/KUALA LUMPUR, Aug 1 (Reuters) - Southeast Asian

countries breathed a sigh of relief on Friday after the U.S.

announced tariffs on their exports that were far lower than

threatened and levelled the playing field with a rate of about

19% across the region's biggest economies.

U.S. President Donald Trump's global tariffs offensive has

shaken Southeast Asia, a region heavily reliant on exports and

manufacturing and in many areas boosted by supply chain shifts

from China.

Thailand, Malaysia and Cambodia joined Indonesia and the

Philippines with a 19% U.S. tariff, a month after Washington

imposed a 20% levy on regional manufacturing powerhouse Vietnam,

Southeast Asia - with economies collectively worth more than

$3.8 trillion - had raced to offer concessions and secure deals

with the United States, the top export market for much of the

region.

Its countries, many of them key players in the global supply

chain, vied to stave off the prospect of losing market share to

each other and of multinational firms shifting operations and

orders elsewhere.

Malaysia's Trade Ministry said its rate, down from a

threatened 25%, was a positive outcome without compromising on

what it called "red line" items.

Thailand's finance minister said the reduction from 36% to

19% would help his country's struggling economy face global

challenges ahead.

"It helps maintain Thailand's competitiveness on the global

stage, boosts investor confidence and opens the door to economic

growth, increased income and new opportunities," Pichai

Chunhavajira said.

The extent of progress on bilateral trade deals with the

United States was not immediately clear, with Washington so far

reaching broad "framework agreements" with Indonesia and

Vietnam, with scope to negotiate further. Pichai said Thailand

was about a third of the way there.

The United States on Friday slashed the tariff rate for

Cambodia to 19% from earlier levies of 36% and 49%, a major

boost for its crucial garments sector, its biggest economic

driver and source of about a million manufacturing jobs.

"If the U.S. maintained 49% or 36%, that industry would

collapse in my opinion," Cambodia's Deputy Prime Minister and

top trade negotiator Sun Chanthol told Reuters in an

interview.

STATUS QUO

In Thailand and Malaysia, business groups cheered a tariff

rate that could signal a maintenance of the status quo between

rival markets, among them beneficiaries of so-called "China plus

one" trade.

"It's very good - we're on par with Indonesia and the

Philippines and lower than Vietnam ... we're happy," said

Werachai Lertluckpreecha of semiconductor manufacturer Star

Microelectronics.

Chookiat Ophaswongse of the Thai rice exporters association

said the similar rate to Vietnam would maintain its share of the

U.S. market, while Wong Siew Hai, president of Malaysia's

semiconductor industry association, said the latest tariffs

would level the competition.

"I don't see the companies doing anything special. It will

be business as usual for now, until they figure out what is the

next best move," Wong said.

Much remains to be worked out by the Trump administration,

including non-tariff barriers, rules of origin and what

constitutes transshipment for the purposes of evading duties, a

measure targeting goods originating from China with no or

limited value added, where a 40% tariff would apply.

Vietnam has one of the world's largest trade surpluses with

the United States, worth more than $120 billion last year, and

has been often singled out as a hub for the illegal re-routing

of Chinese goods to America.

It was a first-mover in trade talks and reached an agreement

in July that slashed a levy from a threatened 46% to 20%, but

concerns remain among some businesses that its heavy reliance on

raw materials and components imported from China could lead to a

wider application of the 40% rate.

"That is the real issue," said one businessman in Vietnam,

who asked not to be named to allow him to speak more freely.

Andrew Sheng of the University of Hong Kong's Asia Global

Institute said the similar tariffs mean Southeast Asian

countries should be relieved that policy uncertainty was over

for now.

"The tariff announcement looks like a classic Trump Art of

the Deal deal - lots of hype and threats, and with one flourish,

the other side feels that it has a reasonable deal," he said.