Institutional Change and Macroeconomic Variables in the ASEAN—Indonesia, Vietnam, and Cambodia: The Effects of a Trade War between China and USA

Fransiskus Xaverius Lara Aba

doi:10.3390/economies9040195

Abstract

A trade war between the United States and China resulted in an increase in trade tariffs on imported goods entering each of these countries. Southeast Asian countries that have trade relations with the two countries, especially in terms of non-oil and gas exports of 25% to 35%, will be affected by export demand. Furthermore, the effects of the trade war will reduce gross domestic product (GDP) in Southeast Asian countries or the ASEAN and increase the current account deficit. On the other hand, the effects of the trade war that led to the decision of foreign investors to move their manufacturing base out of China will produce a flow of foreign investment that is ready to be captured by every ASEAN country.

Highlights

The United States and China trade wars made each country impose an increase in trade tariffs so that the price of imported goods entering the country went up
The opportunities created by the trade war between the United States and China apparently did not necessarily have a positive impact on ASEAN countries because the shifting of the manufacturing base of American companies from China could not be captured by Indonesia, Singapore, and the Philippines
When the manufacturing base has been built, investors will think about the life cycle prospects of the industry so that it can develop and so that it contributes to an increase in gross domestic product (Suddaby et al 2014; Rutherford 1994)

Summary

Introduction

The United States and China trade wars made each country impose an increase in trade tariffs so that the price of imported goods entering the country went up. The American president’s call was based on an announcement from the Chinese government with a plan to impose additional import duties on incoming American products worth USD 75 billion (Nguyen and Canh 2020), which was later responded to by the American president by raising import tariffs of USD 550 billion for products imported from China (Garcia Herrero 2020). The trade war is a term used by media and repeated by politicians and economists for United States (US) action who have raised import duties on imports of manufactured products from China and some other countries and received a backlash from the destination country. In early May 2019, the US government increased tariffs on imports of Chinese commodities worth USD 200 billion from 10% to 25%

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