Policymakers across Southeast Asia are bracing for fallout from a US-China trade war, turning their focus on bolstering their domestic markets to cushion the blow.
Indonesian Minister of Finance Sri Mulyani Indrawati and Bank of Thailand Governor Veerathai Santiprabhob, who are attending a regional meeting of officials in Singapore, yesterday said the conflict would have global repercussions, even if the direct impact on Southeast Asia’s GDP might be minimal for now.
“The composition of our GDP is mostly fueled by consumption” and the government is aiming to boost investment to further diversify economic growth beyond exports, Indrawati said in an interview with Bloomberg Television’s Haslinda Amin.
The deteriorating trade relations between the US and China and prospects for further retaliation “is not going to serve the interests of both parties,” she added.
US President Donald Trump is attempting to upend the global trade framework, arguing that China’s trade practices are unfair, with alleged violations including intellectual property theft and export subsidies.
Indrawati, a former World Bank managing director, said those differences should be dealt with through the WTO rather than erecting tariff barriers.
China is the biggest trading partner for many Southeast Asian economies and an important source of investment and tourism in the region.
While large domestic markets in Indonesia and the Philippines help to shelter those economies from a trade war, other economies in the region, like Singapore, Malaysia and Thailand, are more reliant on exports.
Indrawati said she was still optimistic that Indonesia would meet its GDP growth target for this year of 5.4 percent, a slight increase from 5.1 percent last year.
Veerathai said in a separate Bloomberg Television interview that the US-China trade developments are “definitely something we have to monitor very closely” and that retaliatory actions are of great concern, but that so far “the direct impacts have been quite small.”
The Thai central bank has been trying to manage the baht’s appreciation so it does not undermine the competitiveness of exports as the trade environment becomes more challenging. At the same time, it has to avoid being singled out by the US as a possible currency manipulator.
“As the central bank, we have to step in to ensure that the pace of appreciation is not damaging the economy as a whole,” Veerathai said. “We have to be careful on the impact of currency movement, in terms of volatility and the pace of appreciation on the real sector.”
Malaysia is seeking an exemption from US tariffs on steel and aluminum shipments and to gain clarity on solar-based equipment penalties, Malaysian Minister of International Trade and Industry Mustapa Mohamed told parliament yesterday.
The Malaysian government has requested to meet with US trade representatives on April 17 to sort out a deal.
Elsewhere in Asia, authorities are also worried about the impact on their economies.
Hong Kong Financial Secretary Paul Chan (陳茂波) on Wednesday wrote in a blogpost that the disputes would “inevitably impede relevant trade activities” and could also negatively affect Hong Kong’s economy.
Last year, China’s exports to the US that were routed through Hong Kong represented about 7 percent of the territory’s exports, he said.
World Bank managing director and chief financial officer Joaquim Levy said he was optimistic that the trade disputes would be resolved.
“At the end, people see that there are many ways to get to a win-win situation, so we are confident it will prevail,” he said in a Bloomberg Television interview yesterday. “There is so much scope, because trade is something that usually expands your frontiers, so that is the natural way where things should gravitate.”
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