The US-China trade war will cause disruption in Asia, but it will also create winners


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A new report released today by The Economist Intelligence Unit (The EIU) finds that while the growing trade conflict between the US and China threatens to disrupt global economic growth, there are a number of countries that stand to benefit from the resulting supply chain shifts in Asia, particularly in the automotive, technology and readymade garments industries.

These benefits will be felt primarily among the member countries of the Association of South-east Asian Nations (ASEAN). Nick Marro, an analyst with The Economist Intelligence Unit, notes that “Multinational companies have already been shifting their export-manufacturing operations away from China and into South-east Asia for much of the past decade. The trade war will accelerate that trend.” Malaysia and Vietnam, for example, are already home to a number of major multinational electronics manufacturing companies, and will be able to leverage their improving infrastructure and relatively robust business environments to attract new investment. There will be winners too in South Asia, such as Bangladesh whose existing strengths in garment-manufacturing will position it well to take market share from China. By contrast, Japan, Singapore, South Korea and Taiwan remain more heavily reliant on trade links with the Chinese market, so will be more negatively affected by the disruption that it will experience.

The impact of changes stemming from the trade war will not be felt overnight. According to Nick Marro: “It will take time for multinationals to draft new global and regional strategies, find new business partners, navigate different regulatory systems and secure the required licenses and permits to expand production in new markets. As a result, the negative, disruptive effects of the trade war will dominate in the short term. The full benefits for Asia’s winners are unlikely to emerge until 2020 at the earliest.”


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Gabriel

Introvert, wanderer, blogger, foodie, a hip-hop music writer, and one of the co-founders of a tech start-up company called GigsManila.