What’s driving the new trade war?
The US and the European Union are close to imposing a new wave of protectionist trade measures, though for different reasons. In the US, President Trump has motivations to reignite the trade war.
Just as hopes for an end to the Middle East war are rising, the drums of another war are beating. The world is edging closer to a new trade war as the US and Europe search for ways to cope with China’s surging export competitiveness, and as China threatens to retaliate. These disagreements will be difficult to resolve because their underlying causes are complex.
Unlike a similar challenge in the 1980s involving the US, Japan and Germany, there will be nothing like the Plaza Accord that helped avoid a trade war. Rather, things will get much worse before they get better.
Worsening tensions among Southeast Asia’s most important trading partners will increase the risk of protectionism spilling over to hurt the region’s exports. After all, the US and Europe fear that Chinese exports could be rerouted via Southeast Asia or other regions and will adopt more aggressive measures to prevent this. This could be damaging to the region. In addition, uncertainty around trade will slow business investment.
