All of South-east Asia's economies would be hit if a trade war erupts among the world's largest economies, said Singapore's Finance Minister Heng Swee Keat yesterday.
"The fact that Asean is much more integrated provides some buffer. But we cannot escape the negative effects of a trade war simply because the global economy is so much more integrated now. Any action will affect all of us," he added.
Speaking to reporters from Singapore, on the sidelines of the 21st Asean+3 Finance Ministers' and Central Bank Governors' Meeting in Manila, Mr Heng said: "Any action by any member, particularly by the major economies, can have a very big knock-on effect on everyone else. Ultimately, everyone will be a loser."
Mr Heng said that while the severity of a trade war would vary from country to country, no country would benefit from a trade war - not even the countries that started it.
In recent months, the risk of a trade war between the United States and China, the world's top economies, has grown as both sides threatened to impose steep tariffs on each other's exports. For now, however, both countries have agreed to continue negotiations to avert a trade conflict.
On Friday, foreign ministers and central bank governors from Asean+3, which includes China, Japan and South Korea, met to discuss the threat of trade frictions and rising protectionism, and pledged to stay vigilant and work pre-emptively to avert threats to the global economy.
In a statement after the meeting, representatives of the 13 countries said that protectionism, geopolitical tensions and a faster-than-expected tightening in global financial conditions were adding to uncertainty about the recovery of the global economy.
"These risks, individually or collectively, threaten the recovery in the global economy, and could induce large capital outflow and financial volatility in our region," they added.
They also said they recognised the importance of resisting all forms of protectionism, as they reaffirmed their commitment to an open and rules-based framework for multilateral trade and investment.
Yesterday, Mr Heng was also asked about the impact of rising interest rates on nations that are lining up infrastructure programmes to bolster growth.
For instance, the Philippines, under President Rodrigo Duterte, is embarking on an ambitious US$180 billion (S$240 million) "Build, Build, Build" infrastructure programme to fix and expand ageing road, rail and airport networks. Most of the funding for projects will come from overseas sources like China and Japan.
But experts have warned that if rates rise faster than expected as a result of the normalisation of monetary policies, the Philippines could end up in a debt trap.
Mr Heng told reporters that as the global economy recovers, it can be expected that the normalisation process in monetary policies will begin.
"What we cannot predict is how fast it will be and whether the judgments of central banks are correct. If they do make a mistake, it can also be problematic," he said.
"We must provide sufficient buffer in all this," he added.
