Asia winners in the US-China trade war

Asia are the winners in the US-China trade war

US President Donald J. Trump has started a trade war, mainly with China, but also with the EU and the member states of the ECC, including Norway. This is an excerpt from the Economist recent analysis of the trade war. Malaysia and Viet Nam look to be the main beneficiaries in the longer term.

 

The US and China are rapidly discovering how wrong Donald Trump was when he said that trade wars are good and easy to win.

The two countries have so far imposed tariffs covering roughly US$ 360bn of merchandise trade between them. A breakdown in negotiations suggests that neither side is yet seriously looking for an “off-ramp” in the dispute. The Economist Intelligence Unit expects that by early 2019 tariffs will have been introduced on the vast majority of US-China merchandise trade.

Adverse effect

The US-China trade war will have a significant adverse impact on the world economy. By distorting global trade flows, the conflict will push production to more expensive locations, forcing up prices and reducing efficiency.

The end-price of products will be higher than it would have been otherwise, adding to inflation and potentially forcing a faster tightening of monetary policy in many markets.

Global trade flows are also set to slow, particularly in the short term, as mounting US-China tensions disrupt existing supply chains and dampen investor confidence. The greatest impact will, of course, be felt in the US and China, but many other economies are likely to experience collateral damage.

Still, there will be winners as well as losers. Tariffs tend to shift trade more than they reduce it and, as importers in China and the US look for alternative suppliers, new opportunities will open up for exporters in third-party markets.

Some of those beneficiaries will be in countries such as Mexico (where the US-Mexico-Canada Agreement may facilitate auto parts imports to the US) or Europe (whose agricultural exporters should benefit as US produce becomes more expensive in China). However, the lion’s share of the gains from the trade war will fall to countries in Asia.

Using our world-leading expertise in economic forecasting and analysis, and leveraging our team of industry and country analysts across Asia, we have produced a report that examines which countries in the region will emerge as the key winners from the supply chain shifts caused by the trade war.

The complete report can be purchased here.

 

© The Economist Group / #Norway Today