U.S.-China trade war is a battle to build walls

Washington Post

3 days ago

The Trump administration wants to enlist Southeast Asian countries to build a giant wall around China. The idea is to reduce the countries' reliance on Chinese supply chains, ween them off Chinese exports, and get them to stop letting China transship goods through their ports to evade U.S. tariffs. This was a major point in President Donald Trump's recent trade deal with Vietnam, which imposes a 40 percent tariff on transshipped goods, almost all of which come from China.
The Asian countries themselves, meanwhile, are talking about building a different kind of wall — a wall of self-reliance to insulate themselves from the unpredictable trade moves emanating from Washington. Asian leaders now talk incessantly about the need to increase intra-Asian trade as a counterweight to their overreliance on the American market. In April, President Xi Jinping spoke in favor of uniting the 'Asian family.' Chinese officials call this expanding the country's 'circle of friends.' And many Asians outside China seem to agree.
'We need to fortify our internal foundations,' Malaysian Prime Minister Anwar Ibrahim told a meeting of the Association of Southeast Asian Nations earlier this month. 'Trade more among ourselves, invest more in one another, and advance integration across sectors with resolve.'
So whose wall is more likely to be built?
China is clearly expanding its Asian trade. For more than a decade, it has been Southeast Asia's largest trading partner. China is right next door, after all, and has 1.4 billion consumers. And its long-standing trade ties appear to be deepening. In the first five months of this year, trade with Southeast Asia jumped more than 9 percent. In June, China's Southeast Asian exports surged by 16.8 percent year-over-year.
Also, anecdotal evidence suggests that intra-Asian trade is growing. In Bangkok, anyone who calls for a GrabCar — the regional equivalent of Uber — is likely to get picked up in a new Chinese-made BYD or Aion electric car, rather than a Tesla. Japanese retail stores like Uniqlo, Isetan, Sogo and Muji dominate regional shopping malls. South Korean LG and Samsung, and Chinese Haier are the top-selling appliance brands. Sales of Chinese Xiaomi and Huawei smartphones now rival those of Apple iPhone.
Of course, trade flows in both directions. Southeast Asian textiles, durian, frozen shrimp, rice, coconuts and other delicacies are finding their way onto a growing number of Chinese dinner tables, including in the hinterlands, thanks to China's new 21st century 'Maritime Silk Road.'
Then there's Asia's undeniable cultural 'wall.' K-pop, Korean dramas and Korean beauty products are winning fans across the region. 'Squid Game' topped Netflix charts across Asia.
But this is not to say that Asia might succeed in walling itself off from America.
Steven Okun, an expert on international trade who is the CEO of APAC Advisors, a Singapore-based consultancy, explained the reality to me. 'First,' he said, 'the larger economies' — meaning South Korea, Vietnam, Malaysia — 'are too exposed to the U.S. market and there is no replacing it.'
'Second, the countries are at least as afraid, if not more, of China coming in and dumping all their excess capacity into their markets — just as China has done to the U.S.,' Okun said. 'If any walls get built, it will be to keep the Chinese out.'
In other words, the United States remains the global behemoth, a veritable vacuum for consumer products. American household spending hit an eye-popping $19 trillion in 2023 — double the figure for the European Union and nearly triple that of China.
What's more, for many in Asia, the risk of becoming overly dependent on Beijing looms large. Indonesia has been actively strengthening its various antidumping laws, and recently even banned e-commerce giant Temu over fears it would destroy local businesses. Thailand is eyeing anti-circumvention duties on a host of imported products, mostly from China. Asians want to benefit from China's growth but avoid being crushed by its economic might.
Trump's wall relies on rallying allies who are deeply dependent on the global economy and wary of China. China's wall relies on promoting regional self-sufficiency as a counterweight to Washington's unpredictability.
Look for regional economic integration to increase. Two-way trade numbers will go up. There will be more Chinese smartphones, appliances and electric vehicles in Asian cities. But America's market dominance looks set to persist for years to come. Asian countries won't be able to wall themselves off anytime soon.