FOR THE most part the adverse impacts of the US-China trade war were not felt in 2018, despite the series of import tariffs imposed by both countries and the political conflicts that ensued.
For China, last year’s export receipts in fact saw their strongest gains in seven years, rising 9.9 per cent from a year earlier.
The recent US-China truce agreement has put on hold the expected tariff increases until the end of February, giving time for both countries to negotiate a trade deal. The ongoing trade negotiation seemed to yield significant progress. According the US President Trump’s tweet, the mid-level talks in Beijing last week went “very well” and he thinks, “we are going to be able to do a deal with China”.
So is it time to sound the all-clear and put trade war worries behind us?
Not so fast. The strong export figures last year were driven partly by the so-called “front-loading” efforts, in which exporters brought forward shipments to avoid the upcoming tariff increase. Anecdotal evidence from manufacturers, cargo ships and warehouses suggests that companies in the US were front-loading their orders from China ahead of the additional 25 per cent tariffs, which were expected to become effective on January 1, 2019.
But the recent agreement in the US-China trade truce that put on hold the tariff increase has taken away that sense of urgency. As a result, exports from China saw a sharp 4.4 per cent drop in December last year, the weakest reading since December 2016. Exports to the US fell 3.5 per cent, while imports from the US slumped a huge 36 per cent.
Regardless of the outcome of the US-China trade negotiations, global trade is poised to slow down significantly in 2019.
Thailand, as a small and open economy that is deeply integrated into China’s supply chain, will inevitably bear the brunt of such a slowdown in global demand.
KOMSORN PRAKOBPHOL is head of the Tisco Economic Strategy Unit.