Donald Trump’s return with a tougher trade stance spells trouble, not just for China but for plenty of other Asian economies, according to Goldman Sachs.

Andrew Tilton, the bank’s top Asia-Pacific economist, warned that Trump’s obsession with cutting the U.S. trade deficit might bring more countries into the line of fire. Trump’s “whack-a-mole” strategy could mean more Asian economies face tariffs as he tries to squash any trade surplus that dares to emerge.

Goldman’s note explained the numbers behind this. While Trump’s original tariffs slightly reduced the trade deficit with China, it only made U.S. deficits with other Asian countries shoot up. Now, countries like Vietnam, Taiwan, and South Korea look like they’re next in line.

Vietnam saw massive gains as trade diverted from China to avoid tariffs. South Korea and Taiwan, both major players in the tech and semiconductor industries, also benefited. 

Big trade winners, big new targets

Let’s talk numbers. South Korea managed to score a record trade surplus of $44.4 billion with the U.S. in 2023. Almost 30% of that came from car exports alone.

For Taiwan, exports to the U.S. surged, hitting $24.6 billion in the first quarter of 2024 alone—a 57.9% jump compared to the same time last year. This was driven mainly by tech products, as Taiwan’s information technology and audiovisual sectors cashed in on the U.S. market.

And Vietnam? It raked in a $90 billion trade surplus with the U.S. from January to September 2024, making it one of the biggest winners of the Trump-China fallout.

But with the president’s eyes back on trade deficits, none of these countries can sit comfortably. They’re looking at more than just a few tariffs. Goldman Sachs said these countries might try to soften the blow by importing more from the U.S., balancing their surpluses a bit.

But it’s unlikely that this will be enough to dodge Trump’s sledgehammer approach if he decides to go after them. “Trade policy is where Mr. Trump is likely to be most consequential for Emerging Asia in his second term as U.S. president,” said Barclays Bank analysts in their own recent note.

Still leaning on China’s supply chain

Even with all this trade movement, China’s role hasn’t exactly shrunk. The U.S.-China trade deficit narrowed from $346.83 billion in 2016 to $279.11 billion in 2023, sure, but China remains the giant in the global supply chain.

A lot of components that end up in Vietnamese, Taiwanese, or South Korean products still originate in China. So while it may look like these countries are growing at China’s expense, they’re still part of a China-centered supply web.

Mari Pangestu, a former Indonesian trade minister, spoke about this trend, calling it the “lengthening” of the supply chain. Products go through more countries before reaching the U.S., but a big chunk of their parts still comes from Chinese factories.

Pangestu said, “Most of the components are still coming from China. We call it lengthening the supply chain. So in Trump 2.0, two things will happen. He will start noticing that [trade] is still going to China.”

Her point? Tariffs might be slapped on countries that look like they’re competing with China but are actually shipping goods with heavy Chinese input. “This is going to increase protection. Not just towards China, but to countries that have bilateral deficits with the U.S.,” she said.

To top it all off, Trump’s trade team has big plans on the horizon, possibly going further than his first term. Goldman expects blanket tariffs of 10% to 20% on all imports. Chinese imports alone could face tariffs as high as 60% to 100% by mid-2025. Any Asian economy heavily tied into this supply chain would get caught in the fire.

Trump, Putin, and Ukraine – The other front

There’s also the ongoing drama with Russia and Ukraine. Last week, the Post reported that Trump supposedly had a private call with Russian President Vladimir Putin. In this alleged call, Trump warned Putin against escalating the Ukraine war, pointing to America’s military presence in Europe.

But the Kremlin was quick to dismiss this as “pure fiction.” Kremlin spokesperson Dmitry Peskov denied the call, calling it “false information.” Meanwhile, Trump’s team stayed quiet.

“We do not comment on private calls between President Trump and other world leaders,” said Steven Cheung, the president’s communications director. 

While Trump promises to end the Ukraine war if elected, specifics are nowhere to be found. Ukrainian President Volodymyr Zelensky has already made it clear that any land concessions to Russia are off the table.

And without U.S. support, Ukraine risks losing the war entirely. The British defense secretary, John Healey, sounded hopeful that the U.S. wouldn’t abandon Ukraine, even with Trump’s pro-Russia stance. He expects the U.S. to stick with its allies in the face of Putin’s aggression.

But beyond foreign policy, Trump’s big impact may lie in how he rattles markets. 

Investors and the “Trump Trade” surge

Markets reacted immediately to Trump’s comeback. The dollar hit a four-month high, and Bitcoin reached record levels as investors looked for opportunities in Trump’s win. The dollar was up by 0.6% against major currencies on Monday, while the euro dipped to $1.063, its lowest since April.

The S&P 500 climbed 0.3%, the Nasdaq nudged up 0.1%, and Tesla shares jumped 8%, crossing the $1 trillion market cap threshold. Elon Musk himself saw a personal gain of $32 billion as a result.

Bitcoin, meanwhile, soared by 10%, reaching an all-time high of $84,500. With Republicans expected to take control of both the House and Senate, crypto investors see favorable regulations on the horizon. 

Coinbase and Robinhood didn’t miss out either; COIN shares rose by 17%, while HOOD climbed by 11%. Emmanuel Cau from Barclays summed it up, saying, “What we are seeing is that people are keen to jump on the Trump trade sooner rather than later.” 

Not everyone’s on the hype train, though. Mabrouk Chetouane of Natixis Investment Managers warns that investors are taking risks in a market bracing for more protectionism. “Investors are willing to take risks, even with more protectionism in the pipeline,” he said. For him, Trump’s tariffs are a storm in the making, one that could bring short-term gains but long-term costs.

From trade wars to foreign policy twists, Trump’s agenda has a lot on the line for our markets and global economies alike.