Before Trump was elected as the President of the United States, he stated that his previous bad trade agreement signed a loss in the United States.What he wants is fair trade, not free trade, but does not specify what it means.
Since his inauguration, Trump has launched a re -negotiation trade agreement, and after hesitating for a while, he began to impose tariffs on imported products from China, and China has made revenge on this.The two sides threatened each other to negotiate and resolve the prospect of the trade war unclear, which led to the first reversal of free trade between China and the United States for more than 30 years.How fast and deep such a reversal is it permanent or will it be lifted later?For Southeast Asian countries, the most important thing is to achieve an agreed understanding of how to involve the trade war, how much it will affected, and whether it will usher in a turnaround.
The trade war impacted economic globalization because manufacturers in many countries contributed to final products through intermediate products.
The products sold to consumers are marked with XX manufacturing, which is actually misleading.The final product purchased by consumers may be assembled in XX, but usually contains components from many countries.After Trump raised the problem of losing work due to free trade, an analysis showed that only 40 % of the components from Ford Focus (typical American cars) assembled in the United States came from the United States and Canada.
As far as economic growth and employment are concerned, providing most components for other countries may be more important than the final assembly.Automotive value chain analyst Wang Jiaan pointed out: In the past 30 years, automotive parts suppliers have steadily controlled the actual car manufacturing process. Automotive manufacturers have been weakened to simple assembly and more focused on their considers to be higher.Added value activities, such as brand promotion, marketing, and international business expansion hellip; hellip; these suppliers are now the main force to promote the automotive technology revolution, not their car manufacturer customers hellip; hellip; the world's leading car parts supply supplyBosch's revenue in 2015 was 70.6 billion euros, which made major car manufacturers such as Renault's 45.3 billion euros revenue.
Asian countries have established a strong supply chain. China imports intermediate products to other countries, assembled into the final product, and exported to the United States.According to Fitch International, what is most likely to be hit by the trade war because of the supply chain is South Korea, Japan and Taiwan, which supply semiconductors in China, and Vietnam and Malaysia, which supply machinery parts and communication equipment components to China.
Impact on the trade war on the Asian supply chain
The trade war will suppress economic growth.The chief economist of the International Monetary Fund said in July this year that if trade barriers become a reality, global output may decrease by about 0.5 %, and the US economy is particularly fragile.
A Chinese official said in September this year that the U.S. tariffs on all Chinese imported products have a negative impact on the Chinese economy accounting for about 0.7 % of GDP.These claims failed to reflect the overall situation, because the government can implement domestic economic policies to make up for the negative growth effect of the trade war.So far, it is reported that China intends to stimulate the economy, and the United States will compensate farmers to ease the impact of the decline in economic growth.
Undoubtedly, the economic growth of the United States and China will be directly negatively affected by short -term and trivial.The impact on the economic growth of other countries including Southeast Asia will also be insignificant. Compared with the Asian financial crisis in 1997 and the situation during the 2008 global financial crisis, it is a small witch.For Southeast Asia, what is more important and more interesting is long -term indirect effects.
The negative impact on Southeast Asia is derived from the rise in consumer prices caused by US tariffs, which will reduce consumption.The reason why this spillover effect happens is because the final product sold in the United States is made in China with components imported from other Asian countries.
Trade in Asia accounted for 57.3 % of the total trade, and is rising; a large part of which is components that enter China.The ratio of foreign direct investment in the region has increased from 48 % in 2015 to 55 % in 2016.One driver is that Southeast Asian companies expect the US market to continue to open Chinese products, which ensures that China's needs for components of other countries, so they also make corresponding investment.
Although the overall impact may not be significant, some companies focusing on the Asian supply chain mdash; mdash; China is responsible for the final assembly product for the US consumption MDASH; mdash; mdash;
There are three positive influences: the opportunity to replace Chinese products in the US market; American products in the Chinese market; the opportunity of East Asia to a self -sufficient economic subject.This subject has its own business cycle and has more and more products for domestic consumption.
In the US market, tariffs lead to trade transfer.Southeast Asia's products are relatively cheap because they are not affected by the trade war.The size of this effect depends on the consistency between Southeast Asia and China, depending on the degree of competition between products in the two regions; or from the perspective of American consumers, Chinese products are more popular than Southeast Asian products.Because they are cheaper, because they are not selected.Only in the first case can the imports of the United States shift from China to Southeast Asia as the source.
Trade transfer will occur and may appear over time, but history tells us that this will not happen overnight, and Southeast Asian manufacturers must vigorously sell their products.An example of a trade transfer that may be beneficial to Southeast Asia is that the market share may increase by Malaysia's export of electronic equipment (US $ 9.4 billion) and machinery (US $ 2.4 billion) to the United States; similar situations are expected to occur in the Philippines.
Southeast Asia borrows a trade war to climb the value chain
In the Chinese market, because China has retaliated by raising barriers to US products, similar trade transfer will also occur.The list of products retaliated in China includes agriculture and natural resources. Southeast Asia can provide alternatives to the United States, making benefits flowing faster and becoming larger.China's revenge list listed 120 kinds of food.
In the purchase of liquefied natural gas from the United States, China has narrowed the gap between trading. U.S. Minister of Commerce Ross made it clear on March 23 this year that LPG natural gas may become a victim of the trade war and at least in the short term;China.Another Southeast Asian product that may benefit is palm oil, which will replace the soybeans imported from the United States.
For Southeast Asia, the trade war provides an opportunity to focus on East Asian supply chain for East Asia.In view of East Asia's growth and consumption will be higher than the United States in the future, such opportunities may be a good thing.The importance of component suppliers such as the car manufacturing industry is increasing, and it may be good in the long run.However, only when component suppliers realize that their roles have changed from simply production to play a certain role in the definition of the final product, and the situation will be beneficial to them.
Component suppliers need to change the role, from the supply of components designed and reservations for the final manufacturer, to know how components can strengthen the performance of the final product, and transform themselves into partners in designing the final product.If this can be done, the trade war may help Southeast Asia climb up the value -added ladder and become a component supplier.
The possibility of product assembly from China to Southeast Asian countries cannot be excluded, but this step takes time and may also face the risk of US tariffs on Southeast Asia.
The trade war will mainly affect consumers in the United States, multinational companies operating in China, and Chinese manufacturers.The growth of China and the United States will decline slightly.Some economic fields in Southeast Asia may be hit in the short -term Inner Mongolia, but in general, the impact on Southeast Asia may be positive in the middle and long term.
In the long run, promoting the expansion of the supply chain of the East Asian region to the entire Asia will strengthen the advantages of Asia, but it will lead to more serious economic and political costs in the United States.Asian countries will establish a regional supply chain, and the rules will be drafted according to their own interests.Going down, the biggest loserIt can be a US multinational company, and the biggest winner will be Southeast Asia.
(The author is the former Ambassador of Denmark in Singapore, a senior researcher at the East South Asian Research Institute)
(Original Institute of Research Institute on October 16, Perspective)
(Translation of Wu Hanjun Festival)
