Negotiating an Inelastic US: Why G-minus is the Realist Outcome
Published:
Negotiating an Inelastic US: Why G-minus is the Realist Outcome
by
Danny Quah
Oct 2025
Synopsis: If the US only ever responds inelastically, its diminished international relevance is the expected Realist outcome. If US trade policy continues to make it costlier for countries to export to the US, then those countries will eventually stop exporting to the US. This is the natural progression from G7 to G2 to G-zero … to G-minus.
Whatever concessions different nations offered in response to Trump’s Liberation Day Tariffs (LDT), they must have expected sacrifice would earn returns. In geoeconomics and international politics, making concessions, acquiescing, and aligning attract reward.
The assumption is that when you give up something so that others gain, in exchange they offer you something valuable in return. In labour market economics, if you employ workers and you offer higher wages, you expect a higher labour supply. When you are buying a car and are willing to pay a higher price, you expect the car dealer to provide you a more valuable vehicle. So, too in Great Power geopolitics: if you make concessions, are acquiescent, and align with a Great Power, you ought to receive more of whatever you find valuable in what that Great Power provides.
Economists describe this as elasticity, and the concept can be expressed numerically: for instance, labour supply elasticity is the ratio of the percentage increase in labour supply to the percentage increase in wage offer.
What did nations encounter in their making concessions to the Trump administration on LDTs? They learnt that US elasticity towards them is either zero or negative. Nations that worked hard and made sacrificial concession not only got nothing substantive in return but in several high-profile cases, their circumstances actually worsened.
Vietnam was first to negotiate with the Trump administration. Faced with a LDT rate of 46%, Vietnam managed to negotiate rates down to 10-15%, only to have Trump unexpectedly announce a rate of 20% in general and of 40% on those goods the US identified as trans-shipments. In addition, Vietnam appears to have ignored its own domestic laws in fast-tracking a USD1.5bn Trump family golf complex in Hung Yen Province.
Indonesia began with an LDT of 32% that got lowered to 19% in mid-July. In return, however, Indonesia has committed to USD34bn purchases of US energy, US agricultural products, and US aircraft, and to invest in Louisiana blue ammonia industry. India’s LDT started at 26%, was lowered to 25% in mid-August, but then doubled to 50% (because of its continuing purchases of Russian crude oil), with India’s jewelry, gems, and textiles industries coming under immediate and extreme risk. South Korea’s LDT of 25% was negotiated down to 15% by early August but then had to commit to invest USD350bn in US “strategic projects” and USD100bn in US energy products. (We can also note in passing that South Korea had a Free Trade Agreement with the US.) Similarly, Japan’s LDT of 24% came down, with negotiations, to 15%, but Japan had to commit to invest USD550bn in US projects in EV supply chains, shipbuilding, and semiconductors. Malaysia obtained an early-August tariff rate of 19%, down from LDT 24%, but then had to commit to a USD240bn package of spending and investment on US energy, aircraft, and semiconductor and data equipment.
| Economy | LDT% | Effort | Current tariff% | Purchase and Investment commitments in US |
|---|---|---|---|---|
| VN | 46 | VN General-Secretary To Lam first to call Trump; DC negotiations involving Bessent, Lutnick, and Greer, through July | 20-40 | Preferential access in VN for US large-engine automobiles. Initially negotiated rates of 10-15% unexpectedly raised by Trump, in 02 July discussion, to 20% generally, and 40% for those goods the US identified to be trans-shipments. USD1.5bn Trump family golf complex in VN. |
| ID | 32 | DC negotiations, through mid-July, with Prabowo speaking directly to Trump. Exempted US companies from local content requirements. | 19 | USD34bn commitment to buy US energy, agricultural products, aircraft. Accepted US standards on vehicles, pharmaceuticals, and medical devices. |
| IN | 26 | Delhi, DC, and New York negotiations, initially focused on India’s opening market access and committing to purchases of aircraft and energy, before attention shifted to India’s purchases of Russian crude oil | 50 | After a post-LDT reduction to 25%, tariff rates were hiked in late Aug to double that level because of India’s continuing imports of Russian crude oil. India’s politically important constituencies of jewelry, gems, and textile industries at immediate risk. |
| KR | 25 | DC negotiations, said to be grueling, from broad frameworks to technical discussions. No additional testing in Japan of US-made cars. | 15 | KR already had a Free Trade Agreement with the US, that these arrangements now abrogate. KR commitment of USD350bn to US “strategic projects” investment, plus USD100bn spending on US energy over the next 4 years. Committed to hike defense spending to over 8% GDP, with concerns the US might make further security demands. |
| JP | 24 | Eight rounds of negotiations in DC, with breakthrough after meeting between Treasure Secretary Bessent and Prime Minister Ishiba | 15 | JP commitment of USD550bn to sectors to be directed by the US government, including critical minerals, shipbuilding, and semiconductors. Moreover, the US administration will retain 90% of the profits from these investments. |
| MY | 24 | DC negotiations, through early Aug | 19 | USD240bn to US energy, aircraft, and semiconductor and data equipment |
To get a sense of proportion, Japan’s annual GDP is USD4.03tn, so its investment and spending commitment to the US is 14 percent. For South Korea, it is 26 percent; for Malaysia, 57 percent! These investment and spending packages are so significant that South Korea has requested currency swap lines to help manage the foreign exchange impact. Japan is expected to draw on an existing one already in place with the US since 2013. (Malaysia has not yet requested a currency swap line.)
In economic terms, US elasticity is either zero or negative in response to concessions (and acquiescence and alignment). The right response is to stop making concessions and to stop acquiescing and aligning with the US. Some observers might say, yes, but even if acquiescence and alignment get us little in trade terms, it gets us political and security benefits from the US. The question then is, if the elasticity between trade terms and acquiescence is so unfavorable, why does anyone think the cross elasticities will be any better? Put another way, if you can’t trust the US to respond positively to your ventures on trade, why do you think it would do so in a situation of national security?
Regardless of one’s views on this, however, the elasticity of other nations’ is likely more reasonable. As long as those elasticities are the right sign, then the more expensive it becomes to engage with the US, the less engagement there will be. In economics, this is called a downward-sloping demand curve. Extrapolating a trend from G20 to G7 to G2 to G-zero, we might therefore need to prepare for a G-minus world, where global engagement will no longer have the US in it. No hard feelings, this is just Realism and economics. Obviously, the world is better with America in it than not, but none of the rest of us can make that happen simply by wishing it.
In the limit, the world will have zero interaction with the US, which will then in turn be surrounded only by fish, to its East and West, and friends (to the North and South, or what it can find of them). 
My panel discussion with Melisa Idris and Elina Noor took place in June, two months after Liberation Day, and two months before the resolution I describe. Obviously, we couldn’t have known about any of these details, but the trend to G-minus was apparent in what we did say.
Panel (with Melisa Idris moderator and Elina Noor). 2025. “Consider This: The US, China, and a Changing Asia”, Astro Awani video (19 Jun).
Quah, Danny. 2025. “Concede or Resist”, Straits Times (02 Sep), pp. 22-23
Additional References
Cave, Damian. 2025. “Why Vietnam Ignored Its Own Laws to Fast-Track a Trump Family Golf Complex,” New York Times (25 May)
Dey, Abishek. 2025, “India’s exports to US plunge as Trump’s 50% tariffs bite”, BBC (16 Oct)
Hitkari, Gagan. 2025. “US-Korea alliance in the shadow of Trump’s transactionalism”, Asia Times (08 Aug)
Jones, Callum and MacRae, Penelope. 2025. “Trump imposes 50% tariff on India as punishment for buying Russian oil”, The Guardian (27 Aug)
Khandekar, Omkar and Hadid, Diaa. 2025. “Trump doubles tariffs on India, jeopardizing long-standing ties”, NPR (07 Aug)
Park, Ju-min and Lee, Joyce. 2025. “South Korea says no response yet from US on trade proposals, after rough agreement on security”, Reuters (02 Oct)
Renshaw, Jarrett. 2025. “US tells India that Russian oil curbs are key to trade deal progress”, Reuters (27 Sep)
Suleiman, Stefanno and Kurniawati, Dewi. 2025. “Exclusive: Indonesia plans $8 billion refineries contract with US firm amid tariffs deal, sources say”, Reuters (22 Jul)
Tan, Ai Leng. 2025. “Malaysia pledges over USD240 billion in US deals to avert trade fallout and to lower tariffs”, Business Times (04 Aug)
Turner, Elliott. 2025. “US-Vietnam Trade Deal: What Happened and What to Expect”, The Vietnamese (31 Jul)
US White House. 2025. “List of Adjusted Reciprocal Tariffs”, US White House (02 Apr)
US White House. 2025. “Joint Statement on Framework for United States-Indonesia Agreement on Reciprocal Trade”, US White House (22 Jul)
US White House. 2025. “Implementing the United States–Japan Agreement”, US White House (04 Sep)
Xiao, Estelle. 2025. “Vietnam-US Trade Deal 2025: Summary, Impacts, and Strategic Responses”, Vietnam Briefing (07 Jul)