April 2024
AIIB ASEAN ASEAN (R) ASEAN-ISIS Asia Big Tech CH: Hong Kong Country (R): Indonesia Country (R): Malaysia Country (R): Myanmar Country (R): Singapore Country: ASEAN Country: Australia Country: Cambodia Country: China Country: Germany Country: India Country: Indonesia Country: Japan Country: Laos Country: Malaysia Country: Myanmar Country: North Korea Country: Philippines Country: Qatar Country: Russia Country: Singapore Country: South Korea Country: Taiwan Country: Thailand Country: UK Country: United States Country: US Country: USA Country: Vietnam covid-19 DE: 5G DE: Data privacy DE: Data security DE: Facebook Digitalisation Elections: Indonesia 2019 Elections: Thailand 2019 ESG: Climate Change ESG: Diversity ESG: Energy ESG: Green Finance ESG: Green Growth ESG: Haze ESG: Human Rights ESG: Modern Slavery ESG: Peatland ESG: Riau ESG: Smallholders ESG: Sustainability ESG: Sustainable/Green Infrastructure European Union Event: SDSWR Events: AAF Fukushima Global Citizens Singapore Indonesia: Jokowi Institute: ERIA Institute: SIIA JP: Abenomics Leaders: Kim Jong Un Leaders: Lee Hsien Loong Megatrends: Populism MM: Aung San Suu Kyi MM: NLD MM: Rakhine State MY: Anwar Ibrahim MY: GE14 MY: Mahathir Mohamad MY: Najib Razak New Horizons New Zealand Nicholas Fang Oh Ei Sun Recovery Region: European Union Region: Latin America Region: Middle East Reports Security: South China Sea Security: Terrorism SG: Lee Kuan Yew SG: SG Secure SG: Smart Nation SG: Society Simon Tay Sustainable infrastructure Topic (R): Belt and Road Topic (R): Business Topic (R): Digitisation Topic (R): Economy Topic (R): Green Finance Topic (R): Haze Topic (R): Infrastructure Topic (R): Palm Oil Topic (R): Peatland Topic (R): Smallholders Topic (R): Sustainability Topic: Anti-Globalisation Topic: Belt and Road Topic: Business Topic: Coronavirus Topic: COVID-19 Topic: Deforestation Topic: Development Topic: Digital Economy Topic: Digitisation Topic: E-Commerce Topic: Economics Topic: Economy Topic: Elections Topic: Environment Topic: ESG Topic: Finance Topic: Global Citizens Topic: Globalisation Topic: Human Trafficking Topic: Indo-Pacific Topic: Infrastructure Topic: Investment Topic: Labour Topic: Nuclear Topic: Palm Oil Topic: Race Topic: Regional Integration Topic: Religion Topic: Security Topic: Singapore-Malaysia Relations Topic: Small States Topic: Trade Trade: AEC Trade: CPTPP Trade: FTA Trade: Multilateralism Trade: RCEP Trade: TPP Trade: War Trends (Digital): Cybersecurity UK: Brexit United States US: Obama US: Trump US: Trump WEF youth

US-China: Trade War or Trade Skirmish?

11 May US-China: Trade War or Trade Skirmish?

The US and China are currently engaged in trade negotiations, but can a deal be struck before the first round of tariffs take effect? On 10 May 2018, we held an evening talk with Amb. Michael W. Michalak, Former US Ambassador to Vietnam and Senior Vice President and Regional Managing Director, US-ASEAN Business Council, and Mr. Toh Boon Ho, Deputy Director – Trade, Enterprise Singapore. The session was moderated by SIIA Chairman Simon Tay. Here’s some highlights from the discussion.


What is the likelihood of a US-China Trade War?

It is not clear whether the US and China are headed towards a full trade war, but there is likely to be a trade skirmish. Last week, a delegation led by US Treasury Secretary Steve Mnuchin visited Beijing, presenting a list of strong demands, including reduction of the US-China trade deficit, reduction of Chinese tariffs and subsidies, and China agreeing not to retaliate in the event of any American punitive action. China’s Vice-Premier Liu He is making a return visit to Washington D.C., but it is unlikely China will agree to the US requests as presented.

Beijing cannot afford to show weakness, especially in front of their domestic audience.  However, US President Donald Trump is equally unlikely to back down, for similar reasons. If neither side can back down without losing face, the first round of US tariffs will go into effect, affecting US$50 billion in goods, prompting retaliation from China.


What will happen?

There has been much debate about which side will be affected more by the tariffs, the US or China. However, to some extent this does not matter, as ultimately both economies will be impacted. It is possible that the US may start to see slowing growth and job losses by the 2018 midterm elections, thus affecting the electoral outcome.  It remains to be seen if the second round of US tariffs, affecting another US$100 billion in Chinese imports, will go into effect. It is possible some tariffs may be imposed, but full implementation is unlikely if there is domestic opposition from the US.

If no deal between the US and China is reached, the consultation China has raised via the World Trade Organization will continue, but the WTO dispute settlement process will take a minimum of two to three years.


Impact on Singapore and ASEAN

ASEAN will feel some impact, due to the supply chains that pass through the region. However, there may be opportunities as well, such as firms and investors shifting to ASEAN.

If a US-China trade war breaks out, will Singapore and ASEAN be forced to choose sides? Given that Singapore and others rely on the rule-based system, if push comes to shove, countries will likely choose the side that will continue to safeguard the rules-based system. There have been no exemptions for ASEAN under the US steel and aluminium tariffs; some ASEAN countries, such as Vietnam, are steel exporters.


Global Implications of US Trade Policy, Regional FTAs

 The US-China trade talks are not the only high-profile discussions that the US is engaged in. The temporary exemption for steel and aluminium tariffs has been extended another month for the EU, Canada, and Mexico, but the EU is not happy with this uncertainty. The US is also re-examining the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

While the Trump administration has raised the possibility of rejoining the TPP (or CPTPP), this seems unlikely. However, the current trade climate may rejuvenate trilateral FTA talks between China, Japan, and South Korea, which are now re-emerging after a two-year hiatus. A deal between China, Japan, and South Korea could further lead to closer trade ties between the three countries and ASEAN, even if the full RCEP deal between ASEAN and its FTA partners does not materialise.