US Tariff Hikes and Trade Policy Uncertainty Impact Imports, Economist Reports

In a recent discussion at the University of the Philippines School of Economics, Dennis Novy, chief economist at the UK's Foreign, Commonwealth and Development Office, presented evidence that higher tariffs and confusion surrounding US trade policy have significantly curtailed American imports in 2025. His findings indicate that tariffs alone reduced imports by an average of 4 to 6 percent, while the uncertainty surrounding these tariffs led to an additional decline of 7 to 12 percent.

Novy elaborated that the overall decline in imports reached an average of 13 percent during periods of peak tariffs, with approximately half of this decrease attributable to the uncertainty surrounding trade policies. He emphasized that established trading relationships tend to be more resilient in the face of such uncertainty. Companies that deal in customized products or maintain long-standing partnerships are less impacted than those offering easily substitutable goods.

Novy highlighted an unprecedented frequency of tariff interventions by the US in 2025, with the US Harmonized Tariff Schedule undergoing 32 revisions, compared to an annual average of 10.5 revisions in 2023 and 2024. This complexity was exacerbated by unconventional methods employed in implementing trade policy, including presidential executive orders and proclamations, as well as the use of the International Emergency Economic Powers Act (IEEPA) for country-level tariffs and Section 232 of the Trade Expansion Act for product-specific restrictions.

The economist pointed out that the frequent alterations to tariff rates and the changing rules governing them created a climate of uncertainty that discouraged trade. Novy explained that tariffs themselves are detrimental, but the complete confusion around them is equally harmful. He concluded that prolonged uncertainty over trade policy can be as damaging to trade as the tariffs themselves, effectively amplifying the economic impact of higher duties.

This analysis comes amidst ongoing discussions about the implications of US trade policy on global markets, particularly in Southeast Asia. InsideASEAN has reported on similar concerns regarding Thailand's exports facing increased tariffs and the broader impact of US tariff changes on regional economies.

In Singapore, Deputy Prime Minister Gan Kim Yong recently addressed the implications of US trade probes during a panel discussion. He highlighted that Singapore is actively engaging with US officials to find practical solutions to trade issues, particularly concerning Section 301 investigations, which allow the US to penalize foreign practices deemed unfair. Singapore has faced a 12.5 percent tariff on certain exports since July 24, following US claims that the nation failed to enforce a ban on goods produced with forced labor, a claim Singapore has denied.

While Indonesian coverage of the tariff situation has focused on the broader economic implications for Southeast Asia, emphasizing the need for resilient trading relationships, Singapore's media has framed the issue more narrowly around compliance and maintaining trust with the US. DPM Gan stressed that Singapore does not support the use of its shipping hubs to bypass tariffs, labeling such actions as "cheating" and underscoring the importance of strict adherence to rules of origin.

Moreover, while Indonesian reports have highlighted the potential for long-term economic ramifications due to trade policy uncertainties, Singapore's narrative has leaned towards a proactive approach, with DPM Gan discussing opportunities for deeper cooperation with the US as both nations mark significant anniversaries in their bilateral ties.

In summary, as the US continues to revise its trade policies, the responses from Indonesia and Singapore illustrate differing national interests and strategies. Indonesia emphasizes the broader economic impacts and the need for resilience, while Singapore focuses on compliance and maintaining its role as a trusted trading partner. This divergence reflects the complex landscape of Southeast Asian economies navigating the evolving global trade dynamics.