Caught in the slipstream, or powering ahead? Dr Rebecca Harding examines ASEAN’s trade momentum in the context of wider geopolitical disruption
While the US and China have agreed not to escalate the trade war in a ‘phase one’ deal signed in January 2020,1 tariffs on each other’s goods remain in place. But to what extent are the Association of Southeast Asian Nations (ASEAN) countries caught up in the trade war crossfire?
Tariffs imposed on China by the US have undoubtedly affected the bilateral relationship between the two countries. The UN estimates that in the first half of 2019, US tariffs caused a 25% drop in exports from China to the US – an equivalent value of around US$35bn to the Chinese economy.2 Despite the recent de-escalation of tensions, China’s economy has slowed to its lowest sidelevel of growth in 26 years, with 2019 growth at a mere 6.1%.3
There are many reasons for this, but the material point for ASEAN countries is this: China is its second major export partner after the US, with a value worth more than US$280bn to the region. So how does China’s slowing growth on the one hand, and the impact of the trade war on the other, affect the region’s trade prospects? Are these effects purely negative, or will the reallocation of supply chains to avoid US tariffs actually accelerate a trend of intra-regional trade and boost the region’s economy?