Trade War was Deadly to Asia’s Poor

By N. GUNASEKARAN

In the past decades, many countries in Asia have attained growth and, in some regions there was some prosperity, thanks to growing international trade and increased manufacturing. But the trade conflict that began in early 2018 reversed these trends and became a major stumbling block for Asian economy.

The world’s largest economies and traders, the US and China, together account for two-fifths of the global gross domestic product (GDP) and about a quarter of global trade. So, the trade conflict between them would have greater global impact. Many countries were hit by the tariffs on steel, aluminum, washing machines, solar panels, autos and auto parts.

The escalation of the trade war and global economic slowdown have been affecting the global business and production. China’s economic growth slowed down to 6.2% in the second quarter of 2019, lowest in the past three decades. In July,2019, the US Department of Commerce said that business investment decreased for the first time in more than three years.

Southeast Asian countries have been facing the potential downsides of the trade war. A prolonged trade war and deteriorating global trade would dampen the export-oriented Southeast Asian economies.With serious decline since 2012, Singapore had a 3.4% annualized GDP contraction during the second quarter of 2019. Most of the Asian economies had a sharp deceleration of exports to the US and China, in the first half of 2019 compared with 2018.

Trump’s so-called trade war is not only on China, but on all countries that had a sizable trade surplus with the US. In June 2019, Trump blamed Vietnam of “tak[ing] advantage of [the US] even worse than China” and called Vietnam “the single worst abuser of everybody.” This was his response to the allegations that Vietnam allowed Chinese companies to reroute their exports to the US. In July, the US Department of Commerce imposed 400% duties on steel imports from Vietnam, claiming that the products had origins in other countries.

Trump had labeled China as a currency manipulator, but his list of currency manipulators included nine trading partners, such as Vietnam, Singapore and Malaysia, putting them on its watchlist in May 2019. They were warned of being excluded from the US government procurement contracts.

In August 2019, Trump announced additional 10% tariffs on $300 billion of Chinese imports, and China stopped purchases of US agricultural products. Both sides pursued the trade war, imposing tariffs worth hundreds of billions of dollars on each other’s exports. Later, the Trump administration had a limited trade agreement to roll back some US tariffs, and,China, agreed to purchases of agriculture products by $32 billion over two years.

The US would withdraw 15% tariffs on Chinese goods worth $160 billion, including mobile phones, laptops and clothing. China cancelled tariffs, including a 25% tariff on US-made cars.China agreed to increase purchases of American manufactured goods, including agricultural goods, energy and services, by at least $200 billion over the next two years. These reductions in tariff would reduce the $419-billion US trade deficit with China.

The Phase 1 trade pact with China was expected to be signed by the second week of January in 2020. However, apprehensions still persisted, that the “phase one” trade deal, after protracted negotiations between the US and China in December 2019, would not completely end the trade war. The US President Donald Trump’s “America first” policy was the real reason for the trade war.

In one of his 2018 tweets, Donald Trump said trade wars are good, and easy to win. His philosophy was wrong; the year 2019 showed that trade wars were deadly to the poor and middle classes, in both developed and developing countries. The prolonged recession have been hitting the youth badly, because opportunities for genuine employment were shrinking.

The global economic crisis was already deep rooted for nearly three decades due to the onslaught of neoliberalism — the free-market reforms of the 1970s and ’80s that sought to eliminate price controls, deregulate capital markets, lower trade barriers and reduced state influence in the economy, especially through privatization and austerity. The trade war only accelerated the crisis. Unemployment and enduring poverty have been the persisting pains under the neoliberal regimes in Asian countries and the current trade war was worsening the situation.

In October 2019, a World Bank’s report warned that more than 30 million people around the world could be pushed into poverty (incomes below $5.50 a day) as a result of the trade conflicts between major countries and rising protectionism. And it is to be noted here even the US working people would not benefit in the long run due to the US protectionism, since it was being practiced to establish the hegemonic role of American corporate capital. So the key to tackle this menace of trade war and neoliberal globalization is the united action of the working people of both developed and developing countries to create a new global order based on equality.

N. Gunasekaran is a political activist and writer based in Chennai, India.

From The Progressive Populist, February 1, 2020

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