Trade war is risk for export-led South-east Asia, says World Bank

Men loading rice for export at a factory in Vietnam's Mekong delta. Analysts are warning that a trade war between China and the US will adversely affect economies in South-east Asia. PHOTO: REUTERS

JAKARTA (BLOOMBERG) - The World Bank warned that a trade war between the United States and China will hurt economies in South-east Asia since they rely on exports for growth.

Many countries in the region will feel "knock-on effects" of rising tariffs because they are tied to supply chains that feed into Chinese exports, Dr Sudhir Shetty, the World Bank's chief economist for East Asia and Pacific region, told reporters in Jakarta on Thursday (Apr 12).

"A lot of those, although they may finally be assembled and put together and exported as Chinese products, are the result of a value chain that stretches across this region, particularly in some of the larger" South-east Asian economies, he said.

"The success of this region is based on open trade, it's based on the development of these value chains that over the last decade or so have increasingly centred on China," he said.

The world's two biggest economies have threatened to impose tariffs on each other's exports, clouding the outlook for global trade and growth.

Chinese President Xi Jinping on Wednesday pledged to further open up some sectors in the economy, helping to ease some of the tension.

Dr Shetty said the impact of the tariffs would be felt greatest on the US and China, and growth in advanced economies, including the US, could slow.

Exports are already faltering in some economies with shipments falling in Malaysia and the Philippines in February from a year earlier.

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