US Tariffs Spark Fears of Trade Conflict in Asia

Several Asian nations that are major trading partners with the U.S. reacted strongly Friday to a U.S. decision to impose tariffs on metal imports, raising concerns of global trade conflicts.

China, a key target of U.S. trade concerns, said it was “resolutely opposed” to the U.S. tariff decision, with Japan warning of the impact on bilateral ties.

South Korea said it may file a complaint to the international trade dispute body, the World Trade Organization (WTO). South Korea is the third-largest steel exporter to the U.S. after Canada and Brazil.

Several Southeast Asian nations say they fear a wave of import dumping of steel and aluminum products.

U.S. President Donald Trump, turning aside warnings from economists and members within the Republican Party, signed an order Thursday for new tariffs of 25 percent on steel and 10 percent on aluminum imports to the U.S., saying the measures were necessary to protect U.S. industry.

Trump has exempted key exporters of steel and aluminum, Canada and Mexico, while negotiating changes to the North American Free Trade Agreement (NAFTA), and other countries such as Australia also may be spared.

The U.S. is the world’s largest importer of steel, totaling 35 million tons of raw material in 2017, with South Korea, Japan, China and India accounting for 6.6 million tons.

Global reaction

Thai economist Wisarn Pupphavesa, a senior adviser to the Thai economic think tank, the Thailand Development Research Institute (TDRI), called the tariff aiming to protect U.S. industry a “very bad situation.”

“The U.S. has been a leader in the multilateral system, the leader in the trade liberalization, and the U.S. played a most important role in writing all the rules that are governing the global market now. But now President Trump decided to break those rules … so this is a very bad situation,” Wisarn told VOA.

Economists at London-based Capital Economics said in a release Friday the major concern over U.S. steps to increase tariffs is they mark a “turning point in U.S. policy to a much broader and deeper shift toward protectionism.”

Malaysia’s Second International Trade and Industry Minister, Datuk Seri Ong Ka Chuan, says the government is monitoring the impact of the tariff increase, although steel and aluminum contributed to less than one percent of Malaysia’s total exports.

But Thailand’s Federation of Thai Industries (FTI) said the threat lies in import dumping of steel and aluminum to the Southeast Asian market.

FTI secretary general, Korrakod Padungjit, told local media there were several leading exporters — Taiwan, Japan, South Korea, India, China, Vietnam and Turkey — that may now target Southeast Asia.

The vice president of the ASEAN [Association of South East Asian Nations] Iron and Steel Council, Roberto Cola, told media that excess steel supplies from China would head to Southeast Asia.

High demand

Southeast Asia’s fast-growing economies, such as the Philippines and Vietnam, face a high demand for steel to meet growing infrastructure and development needs.

Japan at 11 percent and China at 14 percent are reported to be the largest Asian exporters of aluminum to the U.S. A shift in exports to Asia would put producers in South Korea, Indonesia, Vietnam and Thailand under competitive pressure.

Thanomsri Fongarunrung, an economist at the Bangkok-based Phatra Securities, said Thailand already was facing steel import “dumping” by China. She said another fear lies in indirect impacts from any escalation into “tit-for-tat” trade protection measures from other regions, such as the European Union (EU).

The EU already has said it will seek to impose tariffs on selected U.S. imports ranging from alcohol to motorbikes.

But the TDRI’s Wisarn says the economic growth in Southeast Asia in the past decade, with its focus on China, will shield the region from major moves by the U.S. to boost trade protectionism.

“East Asia [has] become the new growth core of the global economy. So the impact of the U.S. action, in fact, would have very little impact as far as East Asia is concerned,” he told VOA.

As a result, the role of the economies of China, Japan and South Korea, as well as Australia and New Zealand, will be enhanced by the U.S. decision.

Trade war

But analysts say the greater concern for regional trade and potential conflict lies ahead with a battle over intellectual property theft, especially targeting China.

Economists say the region’s economic growth potential could be hit by a trade war. The World Bank in a January assessment said growth in East Asia and Pacific is forecast at 6.2 percent in 2018, down slightly from 6.4 percent in 2017.

The World Bank, while upbeat, says “rising geopolitical tension, increased global protectionism” a tightening of global financial conditions, or a “steeper-than-expected” slowdown in major economies, including China, pose a downside risk to the regional outlook.


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