A trade war with the United States would deliver a severe jolt to growth and employment across Southeast Asia, delegates at the Asian Development Bank annual meeting in Yokohama told GlobalMarkets.
Policymakers and corporate leaders across Asia remain fearful of the protectionist inclinations of Donald Trump despite signs the prickly and impulsive US president had toned down his rhetoric in recent weeks.
Soon after coming to office, Trump slapped the label of trade “cheaters” on a host of nations that run large trade surpluses with America. He later signed an executive order designed, Trump said, to tackle “foreign importers that cheat”, and which could trigger new anti-dumping duties. Among the regional nations singled out were Malaysia, Indonesia, South Korea, China and Japan.
Paul Sheard, chief global economist at S&P Global Ratings, said Trump’s rhetoric suggested America was no longer willing to trade freely with nations that protected local industries. “The US is saying: ‘We don’t see our firms having the kind of access to your market that your firms have to ours. Those days are over. We want reciprocity.’ The danger is this could descend into retaliations and protectionist measures that would negatively impact Asia’s exporters.”
Trump has softened his speech in recent weeks. After meeting Xi Jinping, he hailed his “great chemistry” with the Chinese president and appears to have shelved plans to label China a currency manipulator.
But the region remains wary. Kim Eng Tan, senior Asia director of sovereign debt ratings at S&P, warned of the threat a trade war would have on the region. “We’ve only just seen some pick-up in momentum, and if the Trump administration comes up with measures that hit the region’s exports, the region will sink into another period of slow growth.”
When big boys fight
Tan warned even the threat of trade restrictions would be enough to jolt the region. “Sentiment cannot be underestimated. Just the threat of a trade war would cut investment, even before we see a fall in trade numbers. Consumer sentiment would be next. This would not be a small thing.”
Concern remains high across the region. Six times more Malaysians believe Trump’s anti-trade rhetoric will have a negative effect on their jobs than those who said it will have a positive one, according to the World Bank.
Concerns are also running high in Vietnam and Taiwan, economies that are highly dependent on exports to the US and China. Joseph Jao, president of Taishin Financial Holding, one of Taiwan’s largest financial conglomerates said: “It’s a genuine cause for concern. If there is a trade war, Taiwan will suffer. When the big boys are fighting with each other, the little boys get kicked.”