Asian countries should work together to integrate and strengthen their industrial chains, which have been hit by the US government’s tariff moves against China, experts told the Global Times on Sunday.
“China and many other Asian countries are in the same industrial chain, and therefore they have the same need to fight against trade protectionism. They should make full use of their advantages and build up the current industrial chain to make it stronger,” Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Sunday.
Upstream companies in countries and regions like Southeast Asia and South Korea provide raw materials and components for export to downstream firms in China, where the components are assembled for export to other countries like the US.
The US’ scheduled tariffs on $34 billion in Chinese products took effect at 12:01 pm (Beijing Time) Friday. In response, China’s additional tariffs on some US imports took effect at 12:01 am (Beijing Time) Friday, the Xinhua News Agency reported.
According to Bai, the US government’s move to increase tariffs on Chinese products will cause problems for upstream global suppliers to China.
Asian countries will be particularly affected. A report by Vietnam Briefing in April noted that as Vietnam’s products are part of China’s value chain, the trade tension between the US and China will have a big effect on countries like Vietnam.
Economies like South Korea will be “badly hit” if the US continues to intensify its trade dispute with China, because these countries are big exporters of “intermediate goods” to China, where they are made into finished products that are then shipped to final destinations like the US, a CNBC report noted on Thursday.
Such intermediate goods include semiconductor chips and screens, which are manufactured separately in different Asian locations, according to the CNBC report.
According to Bai, downstream companies in the US or in other overseas markets will also be influenced, as Chinese products are inexpensive and not easily replaceable.
But, on the other hand, it won’t be difficult for Chinese companies to find replacements for US goods, Bai said.
He cited the example of soybeans. China imports about 35 percent of its soybeans from the US, Bai said.
However, amid the increased tariffs, China can find supplies from countries like Russia and Ukraine instead, he noted.
At the same time, commodity prices might surge as countries look for alternative markets.
A CNBC report in March noted Chinese importers are paying record harvest-time premiums for Brazilian soybeans as the importers need to secure alternative supplies amid the trade tension with the US.
Cong Yi, an economics professor at the Tianjin University of Finance and Economics, said that in the longer term, it will be impossible for the US to break off completely from the Chinese market.
“Actually, what the US wants is to force China to offer more concessions and give them more privileges in business. They want to grab more of the domestic market,” Cong told the Global Times on Sunday.
Source: Global Times