Asian trade shock wave
So far, Donald Trump's economic threat to China has not materialized. The American president promised to list China as a "currency manipulator" on his first day in office. He also proposed a 45% tax on Chinese imports.
But Trump has not taken concrete actions so far, and should not give his Asian trading partners a false sense of security. Analysts said that even if the threat to China is mitigated or abandoned, the United States may introduce a border adjustment tax-which actually imposes a tax on all goods imported by companies into the United States-which may constitute a trade partner country in Asia such as China. Great impact.
Analysts say that the moment when the Trump administration's intentions become more clear may come. Wilbur Ross, Trump's designated Secretary of Commerce, is expected to be approved, heralding a certain "America First" policy on trade will enter the implementation phase.
“Once (Ross) takes office, he is expected to take some actions to prove that Trump has begun to fulfill his promise to treat China hard on trade,” said Arthur Kroeber, head of research at Gavekal Dragonomics. The introduction of border adjustment taxes by the United States is not fixed, but this possibility has prompted outsiders to analyze which Asian countries will be most affected.
If the US government takes a tougher stance on trade and immigrant labor, Vietnam and the Philippines appear to be the most affected, except for China. Analysts said that other Asian countries (such as India and Pakistan) will also be affected, albeit to a lesser degree.
Shen Jianguang, chief economist at Mizuho Securities in Hong Kong, said that the Sino-US trade war will bring a "demand shock" to the Chinese economy, leading to a slowdown in economic growth and an increase in unemployment.
This is because in 2015, China’s exports to the United States amounted to 410 billion U.S. dollars, accounting for 18% of total exports and 3.8% of gross domestic product (GDP). Shen Jianguang said that among the approximately 121 million workers in the export industry in 2015, approximately 20 million jobs came from exports to the United States. Therefore, as long as the US-China trade war breaks out, these people will be affected.
Shen Jianguang added that in addition, China will not only be affected by labor-intensive industries; the export of capital-intensive industries such as power equipment and machinery equipment to the United States will also be affected.
Faced with the tougher trade policy of the United States, Vietnam’s vulnerability stems from its own dependence on the US market on the one hand, and its intermediate products exported to China on the other. The United States is the main destination of Vietnam’s exports. Last year, the United States imported US$42.1 billion in goods from this Southeast Asian country, creating a trade surplus of US$32 billion for the latter.
Vietnam’s exports to the United States account for about 18% of the country’s GDP, the highest in Asia and much higher than other countries or regions. However, as long as the United States responds to protectionism across Asia, Singapore, Taiwan, Malaysia, and Thailand will also be hit (see chart).
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If the United States chooses China as the only target to vent its protectionist anger, Vietnam will still be affected because its exports to China account for about 10% of its total exports. Intermediate products account for an increasing proportion of their exports to China. These products are processed in China and then exported to destinations such as the United States.
From a different perspective, the Philippines is also vulnerable. In terms of merchandise trade, the Philippines’ exports to the United States are equivalent to about 3% of its GDP. When the United States adopts measures to restrict imports (such as through border adjustment taxes), the country’s impact is lower than other emerging Asian countries.
But according to data from research firm Capital Economics, about three-quarters of the total revenue of the Philippine business process outsourcing (BPO) industry comes from providing services to US companies. The booming BPO industry employs more than 1 million people, and industry revenue is equivalent to 8% of GDP, which means that a blow to this industry may slow down overall economic growth.
Finally, if the United States is to tax immigrant workers' remittances overseas, the funds remitted to the country by about 4 million Filipinos will be reduced accordingly. According to Capital Investment's data, this amount of funds is very large, accounting for about 3% of the Philippines' GDP (see chart).
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"We maintain our forecast for (Philippines) GDP growth of 6.5% this year, but the downside risks are clear," Capital Investment macro economist Gareth Leather said. "Especially, as long as Trump Attacks on the outsourcing industry will prompt us to lower our forecasts."
From the perspective of the contribution of migrant workers' remittances to GDP, India and Pakistan are much less vulnerable, but these two countries will also be affected.