As traffic tensions between the United States and China escalate, short-term but widespread disruption can be presumed in Asia — but other regional players may stand to benefit in the long run, bring to light Nick Marro from The Economist Intelligence Unit.
Supply manacles in Asia are so “incredibly integrated,” Marro, an analyst at the research firm advertised CNBC on Thursday.
“As a result of the trade war, in the short term, we are expecting pulchritudinous widespread regional disruption.”
Marro identified three major industries he thought “battlegrounds” for the trade war: technology, autos and agriculture.
Countries such as Vietnam, Malaysia and Thailand could see long-term emoluments in some of their sectors including information and communications technology (ICT), as expertly as autos, Marro said.
Vietnam and Malaysia could benefit the most from the job escalation particularly in low-end manufacturing of technology products such as “halfway components and manufacturing of consumer goods like mobile phones and laptops,” according to a come in by the EIU.
Major electronic companies have existing operations in the two countries, which leave make redeployment of investment and production relatively smoother, the report stage.
Source: The Economist Intelligence Unit
The sector that has held the greatest position in the trade war has been technology, and is expected to intensify, Marro said.
“Most levies are already on electronic components and machinery and we expect the tariffs to escalate to at bottom cover final finished goods — such as mobile phones and laptops — and to tyrannize the discussion around tech increasingly into the umbrella of national assurance,” he said.
The tech sector plays a significant role in the trade war because electronics and kin components amount to the “biggest category of US imports from China” and Washington afters to hamper Beijing’s Made in China 2025 development agenda — an resourcefulness focused on cultivating high-tech sectors.
U.S. tariffs on Chinese auto separates will bring adjustments in supply chains and investments benefiting some regional instrumentalists such as Thailand and Malaysia.
“The U.S. is the world’s largest auto parts consumer and it has already put excises on auto parts that will inevitably squeeze Chinese fabricators,” Marro explained.
This will result in “investment re-diversification, up chain adjustments into some of China’s neighbors,” he said.
Provenience: The Economist Intelligence Unit
Thailand’s auto space stands to emoluments due to its well-diversified trade links with the U.S., Japan and other parts of ASEAN. As such, limited parts producers should be able to win market share from Chinese opponents, according to the EIU report.
Malaysia has over 800 auto component industrialists and a diversified auto component export network, which would be a monumental advantage for the sector, the EIU report said.
Disruption in Asia as result of the U.S.-China job war is inevitable, Marro said.
Countries in the region that are heavily dependent on shipments to China — such as Japan, South Korea, Taiwan, Singapore — are downward to “feel a bit of the pain in the short term,” he added.
“China is a major stopping-place for intermediate and final ICT goods from all four economies, meaning that partnerships in that sector will be heavily exposed to the impact of tariffs on command for these products,” according to the report.
This might have long-term consequences as throngs may decide to move towards this position of not being as reliant on China anymore, Marro added.
Nonetheless, Taiwan and South Korea might be cushioned from the impact as these countries oblige a secure positioning in the supply chain since they specialize in sharp precision equipment.
The U.S. and China are currently embroiled in a trade dispute, with both countries cuffing additional duties on each other in the past few months. The U.S. has imposed bonus tariffs on $250 billion worth of Chinese imports — with U.S. President Donald Trump inauspicious to impose levies on all $500 billion worth of goods from the Asian monster. Beijing has retaliated with additional tariffs on $110 billion usefulness of U.S. imports.
A meeting between Trump and his Chinese counterpart Xi Jinping at the G-20 top in Argentina this month will be of great significance, China’s Shape Councillor Wang Yi, said on Thursday. But analysts are divided on whether any save can be expected from the escalating tensions between two of the world’s economic superpowers.