Because the U.S. is specifically targeting Chinese-made goods with potential trade tariffs, some Southeast Asian countries could reap benefits, DBS said in a note on Friday.
If the U.S. had imposed trade tariffs on all exporters of a specific product class across-the-board, only local U.S. suppliers would be likely to benefit, noted DBS senior economist Irvin Seah.
But because the target is likely to China, some trade could be diverted to Southeast Asian countries, Seah said.
“Import tariffs imposed on certain products from China could benefit exporters of similar products from other countries. The trade flows
could be ‘diverted’ from China to other competing suppliers,” Seah said. “That is, if U.S. importers find it too expensive to source from China, they could switch their procurement sources to countries like Taiwan, Korea, Vietnam, Thailand, Malaysia etc.”
Seah added that countries which already have trade deals with the U.S., where the trade terms could be more favorable, would see more of an advantage.
“Beyond the obvious better trade terms for their exports to the U.S., these countries could potentially see more inflows of foreign investment
as companies reassess their global manufacturing supply chains,” he said. “For example, countries such as Vietnam could benefit in the lower value-added sectors due to the existing Trade and Investment Framework Agreement (TIFA) between both countries. Singapore with its longstanding U.S.-Singapore Free Trade Agreement (USSFTA), could see benefit in its higher tech sectors.”
However, Seah noted that overall, the net impact on the global economy will be negative if the trade spat deteriorates further.