Why US-China trade war’s latest escalation could be good news for Brazil, Mexico and Vietnam

 

    With US tariff hikes on Chinese goods kicking in on Friday, other countries are watching with interest

    But their gains may not offset an overall negative impact on Asian economies

 

Keegan Elmer, South China Morning Post

10 May, 2019

 

Brazil, Mexico and Vietnam are among the countries that could make marginal gains in areas such as manufacturing and agriculture should US-China tensions continue after they flared up again this week, analysts have said.

 

The trade war between Washington and Beijing has already caused shifts in global trade, and will continue to create winners and losers as businesses try to cope with increased uncertainty.

 

The United States officially raised tariffs on US$200 billion of Chinese goods from 10 to 25 per cent on Friday, in a new escalation of tensions even as China’s Vice-Premier Liu He visited Washington for talks.

 

Donald Trump had said last month that the two sides were “very close” to a deal that would end nearly a year of mutual tariff levies, but the introduction of new tariffs on Friday – as threatened by Trump last Sunday – may change the landscape.

 

Global trade networks have been rocked by the US-China tariff exchanges that began last July, but uncertainty for some has opened doors for others.

 

“So far, US-initiated tariffs have mainly hit lower-end and labour-intensive sectors,” said Rob Koepp, Hong Kong director of The Economist Corporate Network. “Economies that are well positioned on the sidelines, like Vietnam and Brazil, then have an opportunity to jump in and offer goods that avoid the increasing tariffs.”

 

Tommy Wu, a senior economist at Oxford Economics, said: “Malaysia and Thailand could also be winners because they have relatively good infrastructure already in place and have a more business-friendly environment than places like the Philippines or Indonesia that have the advantage of lower wages but also poorer infrastructure.”

 

Wu warned, however, that renewed escalation of US-China trade tensions may generally have a negative effect on trade in Asia.

 

“There is some trade diversion where Asian economies have seen exports to the US rising, but that was not enough to offset the overall trade weakness.”

 

The Asian Development Bank downgraded its growth forecast for the Asian economy this year from 5.7 per cent to 5.6 per cent, citing US-China trade tensions as a factor along with other uncertainties such as Brexit.

 

US soybean growers expressed displeasure with Trump’s new tariffs, fearing that retaliatory tariffs placed by China on their beans last year may continue to cut sales to China...

 

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