Asian Nations Need To Tackle Rising US Trade Protectionism

Asian countries need to be concerned over the risk of trade protectionism as advocated by the United States and tackle the issue rather than merely treat it as an isolated case for a particular country

KUALA LUMPUR, (UrduPoint / Pakistan Point News - 21st Feb, 2018 ) :Asian countries need to be concerned over the risk of trade protectionism as advocated by the United States and tackle the issue rather than merely treat it as an isolated case for a particular country.

Economists pointed out that the trade war between China and the US would have a trickle-down effect on export-oriented countries like Malaysia, Hong Kong and Thailand, says Bernama report. The US last month announced that it would impose a 30 per cent import tariff on solar panels which would mainly affect Chinese, South Korean and Malaysian exporters.

The imposition of between 20 and 50 per cent import tariff for washing machines too would affect South Korean exporters. The main argument for these measures was to protect the domestic industry, an element of President Donald Trump's 'America First' campaign.

Going further, the US was considering to slap high tariffs and/or import quotas on steel and aluminium from a range of countries, including China, and the latter has warned of retaliation if the metal tariffs are imposed.

A key question was whether these measures would mark the start of serious trade tension between the US and China. Deutsche Bank AG Global Head of Economics Dr Michael Spencer said Malaysia absolutely needed a liberal global and regional trading environment to grow its trade.

"I think it is a bit hard for people to get their minds around how complex and interconnected production chains are in Asia. This is something that the governments well understand when we talk about the risk of protectionism.

"We can't look at this as a spat between two countries; there is a fundamental principle at stake in this region," he told Bernama here when met on the sidelines of the recent World Capital Market Symposium.

Within Asia, China was likely to be the country most in focus for the Trump administration, given that the US trade deficit with China was, by far, the largest at over US$344 billion (RM1.34 trillion) from January to November last year.

Trump, who was elected the 45th US President slightly over a year ago, often cited the trade deficit as an economic scorecard and a sign of economic weakness. "The most worrying aspect of protectionism is Section 301 of the US Trade Act of 1974, introduced by the US administration last August.

"They have 12 months to come up with an estimate of the damage to the US economy from supposed intellectual property theft in China.

"In everything else like washing machines and solar panels, the law sort of mandates how much tariff you could put on and how quickly it would expire.

"However, under Section 301, the White House believes it has unlimited power and that is where you can get really macroeconomic by significant sanction on China that will affect everybody," Spencer explained.

Section 301 authorised the US President to take all appropriate action, including retaliation, to obtain the removal of any act, policy or practice of a foreign government that violated an international trade agreement or was unjustified, unreasonable or discriminatory, and that burdened or restricted US commerce.

BNP Paribas Asset Management Senior Economist for Greater China, Chi Lo, called the US-China trade spat as "political posturing" rather than the countries really wanting to fight each other. Lo noted that the global supply chain would be disrupted by rising US trade protectionism and would hurt emerging markets, especially in Asia, due to its heavy reliance on export to the US market.

He added that trade protectionism imposed by Trump could be part of a strategy to divert attention away from political issues, including investigation on Russian interference in the 2016 US elections.

Since July 2016, the Federal Bureau of Investigation has been investigating the Russian government's alleged attempt to influence the 2016 presidential election, including whether Trump's campaign associates were involved in those efforts.

"One simple calculation that I have done is to ask whether there will be a full-scale trade war between US and China, which will also affect emerging markets especially Asia because we are export-oriented here.

Who is going to be hurt more? "Definitely on the trade side, China and the US can do tit-for-tat on tariffs and what not, but when you look at the investments side, the Americans have much more investments in China than China has in the US.

"So I am pretty sure that if Beijing wants to push the trade war against the US to the extreme, they will hit the US investments on their shores through various trade barriers and other restrictions, which means that the Americans will be hurt more than the Chinese," he said.