Trade war ripples are expected throughout Southeast Asia

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A mechanic works at factory in Hanoi, Vietnam.

HANOI, Vietnam — Business and political leaders from throughout Asia gathered this week to meet in Hanoi for the annual World Economic Forum on the Association of Southeast Asian Nations (ASEAN).

As the world’s two largest economies continue to wage an escalating tariff war, global trade was one of the primary topics on the agenda.

At a CNBC session during the conference that was developed in partnership with the World Economic Forum, Alan Bollard, executive director of the Asia-Pacific Economic Cooperation Secretariat said the trade friction between Washington and Beijing is “looking worryingly bilateral.”

“There are some big currents around this region coming from there,” he added.

For one, Hong Kong is grappling with the difficult trading climate, given the country’s role as a bridge into and out of China, according to Victor Chu, chairman and CEO of First Eastern Investment Group. He said “there will be serious repercussions if the trade war is going to be more than a short-term phenomenon.”

Chu mentioned that Hong Kong is “looking at closer relationships with Japan and ASEAN, while contributing to China.” In fact, the city signed a trade agreement with ASEAN last November.

Supply chains

If major economies don’t resolve their trade disputes and instead descend into a long-term tit-for-tat trade conflict, then global supply chains would likely see significant disruption, experts have predicted.

Chu said that “a lot of the manufacturers here produce intermediate products for final assembly in China,” and he suggested that Southeast Asian manufacturers could actually see benefits from the trade war in the medium or long term.

In the short term, however, “it is actually quite difficult to replace China’s supply chain,” he said.

Furthermore, the trade disputes could breathe fresh impetuous into alternative regional trade deals like the Regional Comprehensive Economic Partnership (RCEP).

Ignatius Darell Leiking, Malaysia’s minister of international trade and industry, said “ASEAN should start thinking about consolidating together once more.” He added that the region needs to “start taking opportunities” by creating “an economy through ASEAN,” to “cushion all the effects of the uncertain American-Chinese trade war.”

As trade tensions continue to be a concern for the global economy, Bollard said it is essential for the “next tier of economies and countries to step up and take leadership.”

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