Since the ASEAN Summit, trade tension between the US and China took a turn for the worst. On 1 August, Trump announced additional 10 per cent tariffs on $300bn of Chinese imports, to which China’s Ministry of Commerce responded by halting purchases of US agricultural products. Shortly after, the People’s Bank of China let the yuan depreciate, sending shockwaves across financial markets worldwide. Many worry that this signals the onset of a currency war against the backdrop of a global economic slowdown.
Some observers are pointing to Southeast Asian countries as potential winners of the trade war as companies have begun shifting their manufacturing activities out of China and into its southern neighbours.
Such views, however, understate the challenges and potential downside faced by Southeast Asian economies. For Southeast Asia to truly reap the benefits of the trade war and hedge against its attendant risks, it will have to step up its commitment to multilateralism, proactively invest in infrastructure and production capacity, and increase regional supply chain integration.