The global capital markets will roil again this week as world powers are locked and loaded for a trade war. US President Donald Trump is expected to sign an order imposing 25 percent global tariffs on steel and 10 percent on aluminum this week, a move that will almost certainly trigger retaliations from major trading partners.
As the world’s largest steel exporter, China’s response will be less considerate compared to how it treated Trump’s protectionist streak in the past. Following the US’s decision in January of imposing 30 percent tariff on solar panel imports from China, Beijing has retaliated by ordering anti-dumping and anti-subsidy investigations into the import of sorghum and soy from the US. This sends shivers throughout the US farm sector as both commodities are their most valuable exports to China.
At the other side of the Atlantic, EU leaders are fuming. European Commission President Jean-Claude Juncker on Friday said the bloc would respond to Trump’s tariffs by targeting iconic American brands such as Harley Davidson Inc. motorcycles, Levi Strauss & Co jeans and bourbon whiskey. Trump responded the next day via his tweet, saying that the US would apply tax on cars imported from the bloc if the EU “further increase their already massive tariffs and barriers.”
However erratic Trump’s tweets might be in the past, his Twitter followers
So, where does this leave us in Southeast Asia?
In April, Trump signed an executive order that launched a 90-day investigation against 16 countries with which the US runs a bilateral trade deficit. The list of countries included Indonesia, Malaysia, Thailand and Vietnam. Since then, Vietnam has become the first casualty of this “America first” policy. In August, the US department of commerce slapped anti-dumping duties on fish fillet from Vietnam, causing the country’s seafood exports to the US throughout 2017 fallingby 2.9 per cent year-on-year.
Indonesia came second in February when the US commerce department decided to impose up-to 341 percent import tariff on biodiesel from the country. The ruling effectively makes the US market inaccessible to Indonesian producers. In 2016, US biodiesel imports from Indonesia reached $268 million,according to the commerce department. Indonesia is poised to challenge the ruling at the WTO, which in January ruled against similar anti-dumping measures by the EU onIndonesian biodiesel.
Thailand is likely to be next. US Commerce Secretary Wilbur Ross initiated new anti-dumping investigations last month against rubber bands from the country as well as those from China and Sri Lanka. In a statement, Ross said his department “will act swiftly” and would ensure that “US business and workers have a fair chance to compete.”
It appears obvious that trade disputes between the US and Southeast Asian countries will escalate. While these disputes will meet their final resolutions at the WTO, Trump risksalienating Southeast Asian countries in the process and bringing them closer to China, both economically and politically. This is particularly problematic fo
Such a situation will not bode well with the US’s strategic interest of rebalancing China’s hegemony in the region. In the long run, Trump’s art of making trade wars will not, to use his own words, “work out for the best”.