The US-China trade war continues to dominate financial news. The war began when President Trump took the first blow in early March by imposing a 25% tariff on foreign steel and a 10% tariff on aluminium. China counter attacked by imposing tariffs on 128 US imports worth $3billion (Chandran, 2018). The war has continued, and further tariffs have been applied, with many individuals fearing that such actions will substantially damage global trade. However, with no resolution in sight, are there any winners?
One surprising winner from the US – China trade war appears to be Vietnam. Numerous manufactures have shifted their operations from China to Vietnam to avoid Trumps wrath. Resulting in Vietnams surplus (the amount by which a country’s exports exceed it imports) with the US to increase by 39% to £25.3 billion (Jamrisko, 2019; Heaton, 2019). Officials report that this effect is expected to drive Vietnam’s economic growth to 6.6% this year and solidify their position as one of the fastest growing economies within Asia.
Another winner of the US-China trade war is Mexico – which has emerged through the wreckage as a manufacturing hub. Mexican engine filter companies, such as Apex Instruments, who produce filters for cars, experienced a rise in US market share of 15.8% in March (Webber, 2019). With overall exports increasing by 6% this year alone. This in turn has fed through to Mexican markets, as measured by the iShares MSCI Mexico ETF, which has jumped 14% since August. The Peso, Mexico’s currency, has also appreciated 3.5% against the dollar (Mellow, 2019) highlighting Mexico’s strengthening economy.
It also appears that the tension between the US and China has given new impetus to the Regional Comprehensive Economic Partnership (RCEP) which is a proposed free trade agreement between the member states of ASEAN (Association of Southeast Asian Nations) and its six FTA (free trade agreement) partners. All members are currently attending a summit hosted in Bangok which will continue until the 4th of November. It is rumoured that the summit will accelerate progress and that an agreement will soon be finalised (Aljezera, 2019). If so, it would be the world’s largest free trade agreement, compromising 16 countries and almost a third of global economic output (Harding et al, 2017).
Taking account of this it appears that winners do exist. The decline of US and China trade has allowed new economic players to emerge from behind the scenes, ready and willing to fulfil China’s trade shoes.
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Sources
Chandran.N, 2019, ‘China strikes back at up to $60 billion in US tariffs with only $3 billion of its own’ CNBC (Online). Available at: https://www.cnbc.com/2018/03/22/trade-war-china-retaliates-with-only-3-billion-in-tariffs.html
Harding et al, 2019, ‘China and Japan vie for control of Asia trade deal’. Financial Times (Online). Available at: https://www.ft.com/content/d34d324c-03d8-11e7-ace0-1ce02ef0def9
Heaton.C., 2019, ‘Vietnam: winning Trump’s trade war’. Money Week (Online). Available at: https://moneyweek.com/516382/vietnam-winning-trumps-trade-war/
Jamrisko.M, 2019, ‘Vietnam is a Trade War Winner. Now it has to figure out how to stay ahead’. Bloomberg (Online). Available at: https://www.bloomberg.com/graphics/2019-new-economy-drivers-and-disrupters/vietnam.html
Mellow.C., 2019, ‘Mexico Could Win From the U.S.-China Trade War. Its President Isn’t Helping’ Barrons (Online). Available at: https://www.barrons.com/articles/mexicos-lopez-obrador-may-be-wasting-the-u-s-china-trade-war-51570788001
Webber.J., 2019 ‘Mexico reaps gains from US-China trade war’, Financial Times (Online). Available at: https://www.ft.com/content/e291718a-7c6e-11e9-81d2-f785092ab560
