What is Asean’s best bet to deal with a global trade war?

Asean is at crossroads in the wake of a trade war started by US President Donald Trump, with the risk of a boomerang effect on Southeast Asia.

The tussle is biting into China’s exports to the US, raising the prospect of a spillover effect for countries that have deep economic ties with Beijing. The question is whether or not the countries in Southeast Asia need to be wary of the trade war.

China’s exports to the US from January to May fell to $187 billion, from $205 billion for the same period last year, according to the US Census Bureau.

The $18 billion lost has a political effect on China. It shows that Mr Trump’s aggressive battle against Beijing is working in the favour of the US. It also means it could affect countries like Malaysia, a major trading partner to China.

In 2017, Malaysia’s trade with China increased by 20.6 percent to 290.6 billion yuan. Exports to China rose by 28 percent to more than 126 billion yuan, while imports grew by 15.5 percent, reaching 164.5 billion yuan.

In Beijing, the country’s leadership took note of the dip in their export earnings, even though the country’s total exports are still on the rise. With this new external threat to the country’s economic growth, Beijing is forced to step in to ensure economic stability.

Political and economic experts believe the current trade war could also influence our region. They are saying the American tirade against the World Trade Organisation (WTO) may result in a shift in trade flows.

The flow is against the US, which has registered trade deficits with many nations. For example, the US has a trade deficit with Asean, but this has not dampened Mr Trump’s interest in the region.

Instead, investment between the US and Asean is flowing well. Asean is the fourth largest trading partner of the United States. But with $234 billion in two-way trade, Asean may need to tread with care.

In April, the US Trade Representative’s Office said it was reviewing the eligibility of Indonesia for the Generalized System of Preferences (GSP).

The panicked Indonesians are lobbying the Americans for fear of losing the benefits of the reduced tariffs on about $2 billion worth of exports to the United States.

This is one example where the US could impose its will and draw Asean members out of their cosy union to bow under pressure.

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