Royal University of Phnom Penh

Institute of Foreign Languages

Department of International Studies

Subject: Association of Southeast Asia Nation (ASEAN102)

Lecturer: Thong Meng David (TMD)
Class: DIS M1.1

Topic: Impacts of US-China trade war on Southeast Asia

Group 3 Members:
Keo Sreyleak
Mon Panhavuth
Pheng Sovanmealadey
Pich Socheata

Academic year: 2020 - 2021

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 Abstract

In particular, this paper aims to examine the impacts of US-China trade war on Southeast

Asia in both economic and political terms and the lessons learned for Cambodia. The first and

second sections examine the impacts both politically and economically whereas the last section

provides. The paper found that the impacts of US-China trade war on Southeast Asia case are a

combination of both positive and negative. Economically, Southeast Asia was a potential region

that involve the competition between the U.S and China. Due to economic purpose, the U.S has

put tariff on China which led to the process of trade war. Politically, the U.S and China use its

power as a pressure to force nations in the world to be follow their political system which is easily

to control both directly and indirectly.

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 Contents
Abstract……………………………………………………………………………………..…...1

I. Introduction…………………………………………………………………………..…3

a. Background Information…………………………………………………………….....3

b. Research Questions …………………………………………………………………….3

c. Thesis Statement ……………………………………………………………………….3

II. Economic Impacts of US-China trade war on Southeast Asia………………………4

III. Political Impacts of US-China trade war on Southeast Asia………………………...6

IV. Conclusion………………………………………………………………………………8

V. References………………………………………………………………………….……9

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 I. Introduction

a) Background information

It is known that Southeast Asia is a region which is very potential that attracts many economic

and political investments due to its high population, favorable geography and political strategies.

This led to competitions between the U.S and China on Southeast Asia. Trade war between the

U.S and China that has begun since 2018 during the presidency of U.S former president Donald J.

Trump, eventually leading to tariffs on some US$550 billion of Chinese goods and US$185 billion

of US goods (Andrew Mullen, 2021). This trade war has continued until Biden’s administration

which is known that it has not improved since the new administration has come. However, U.S

and China trade war does not only impact on the U.S and China but it also impacts on many regions

especially the Southeast Asia. China big plan is to successfully achieve Belt and Road initiative

while U.S is enhancing and improving FOIP in order to stop China’s influence.

b) Research questions

By seeing the process of U.S-China trade war has kept raising up significantly and continued

to influence all over the world. However, this paper will examine the impacts closely on one

specific region which is Southeast Asia that is located in the continent of Asia. Therefore, what

are the impacts of U.S-China trade war on the political image of the region of Southeast Asia?

What are the impacts of U.S-China trade war on the economic aspect in Southeast Asia?

c) Thesis statement

Aiming to understand and catch up the significant of the impacts of US-China trade war on

Southeast Asia, the aim of this paper is to examine specifically on the political impacts and the

economic impacts in of this trade war on the region of Southeast Asia.

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 II. Economic Impacts of US-China trade war on Southeast Asia

During Trump’s administration, when the United States put a 25% tariff on Chinese goods

worth $34 billion. It also shown that the US Fed Reserve System's inflation-targeting monetary

policy reduced inflation (Pramuk, 2018). China is using its massive labor population to cut the cost

of labor-intensive and low-cost products from the United States, which it was importing into

Southeast Asia. Because of the higher US consumer pricing tariffs, which decrease consumption,

and increased items created in China on US markets through parts imported from other Asian

nations, this trade policy has a negative impact on Southeast Asia. Southeast Asia get attack

through the trade war than the tariff also leads to trade diversion that’s reason Southeast Asia will

be less costly. Additionally, Economic impact of US-China trade war make Southeast Asia will be

having nothing to challenges on stage if financial crisis happens again like situation in 1997 and

global financial crisis in 2008. Southeast Asia will be victim over a longer term. (Menon, GLG,

2021)

As a result, the China-US conflict also lead to slowdown GDP through Southeast Asia since

2018 of third quarter in 2019. The main factors that lead to this slowdown because of uncertainly

of driver of production, investment, export and import. Moreover, low inflation, economic outlook

worsens make Southeast Asia stay in bad situation and regional central banks have shifted to a

more accommodative stance. The Philippine, Malaysia and Indonesia are expected to reduce 25

percent of tariff to efforts for prevent the slowdown of economy after it has paused with any tariff.

However, Thailand and Philippine still have a strong expect to reduce on tax policies. For Malaysia

in 2020 even through has an announced Mild expansion budget, government still expects to fiscal

consolidation. (Duc, 2019)

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 To strengthen the cooperation with their allies and to stop or to block the influences of their

competitors, US and China both has their own foreign policy which is known as U.S FOIP and

BRI which is projected by China.

China’s Belt and Road Initiative (BRI) was coined in 2013 by China’s President Xi Jinping. It

is a strategy initiated by the People’s Republic of China that seeks to connect Asia with Africa and

Europe via land and maritime networks with the main aim of improving regional integration,

stimulating economic growth and increasing trade that is estimated to spend about one million of

million US dollar. (European Bank, n.d.). However, to increase engagement with ASEAN,

stopping China’s influences and to alternate the China’s BRI, former U.S president, Donald Trump

announced FOIP in 2017 which is known as Free and Open Indo-pacific. Its main aim is to counter

politically and economically on China’s influence in Asia including Southeast Asia (BCSB, 2021).

Additionally. In this case, China was the first to establish economic development project which is

now involving over 140 countries in 2021 that includes almost southeast Asia nation Brunei,

Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippine, Singapore, Thailand and Vietnam

except Timor Leste. These countries are very satisfied since they are able to strengthen and

enhance their economic development processes. However, by seeing the involvement of these

countries into BRI project, the U.S is very concerned about this and activate Quadrilateral security

dialogue (The QUAD) which is involved by the U.S, India, Japan and Australia is to grab the

attention of trade purpose from these countries also to promote democracy in Asia and to guarantee

peace stability in the region. During this situation, it impacts hugely on southeast Asia nation since

they should choose one side in order to maintain their economic processes but those nations are

worried that they could not continue their foreign policy with U.S or China.

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III. Political Impacts of US-China trade war on Southeast Asia

The influence of ideology of US and China on 21st century is determined as the second cold

war which is changing political system in Southeast Asia. Political risk effects on company's

operations and profits as any economy, social, or business in relation and it is expected to have a

hard effect, so the threat increases over time due to the higher possibility for occurrences and

changes. Machinery, electronics, and information technology are the key target sectors that the

U.S want to slow down China system. The U.S is clearly targeting China's ambition to expand

manufacturing by aggressively progressing high-tech sectors. (Elkommos, 2018)

Two political systems that are very influenced and powerful in the world which are democracy

that base on moderatism and authoritarian that base on communism. For instance, the U.S demands

Cambodia to maintain democratic political system or the Generalized System of

Preferences (GSP) will not be existed in Cambodia anymore which will effect on Cambodia’s

economy. This action can illustrate that the U.S tries to force Cambodia to follow its policy directly

and indirectly. While China’s authoritarian seems to be followed by many nations due to its

economic policy.

U.S foreign policy over its allies is successful policy. Its cooperation is to maintain their

strength and to slow down their competitors. In this case, China has become a target that both the

U.S and its allies because of the raising of China’s economy, technology and military. However,

to decrease China’s influence, US and its allies has been focusing on establishing new multilateral

forums and linkages between European and Indo-Pacific allies and development on strategically

and operationally with allies. In addition, The Quad is an example of it.

However, China also counters back the U.S which impact on Southeast Asia. The great power

of US on alliance network has been a big problem that China and its allies will face in Southeast

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Asia cooperation. In this case, to decrease U.S.’s influence, China’s appears to be pursuing three

ways. First is maintaining a non-hostile external environment in order to focus on domestic

priorities. Second is reducing dependence on US while increasing the rest of the world's

dependence China. Third is expanding the reach of Chinese influence overseas. At the end, China’s

are development on both at home and abroad to make their future becoming the world number one

on economy. (Menon, GLG, n.d.)

The cooperation between China and US with ASEAN nation has started on developing on

economy, trade, technology and education as well. In contrast, this cooperation between both of

them with ASEAN nation still unequal because some nations follow the U.S and some follow

China. There are two ways of untrusting each other of ASEAN which impact hugely on the region

of Southeast Asia. First is about differences between political system. It is certainly that some

nation in Southeast Asia is democracy and some nation is authoritarian. By the way, the differences

of system also can make each other untrusting because some nation thinks democracy or

authoritarian it more successful, peaceful or more development. It is also clear that distrust between

both power is at an all-time high. Second way of untrusting each other of ASEAN is US-China

rivalry. ASEAN member countries has not seen what is happening of the US-China rivalry in

Southeast Asia. Because of the rivalry of these two power countries that affected to the small

countries. (CISION, 2019)

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IV. Conclusion

To sum up, the impacts of U.S-China trade war have impacted on Southeast Asia both

positively and negatively. Economically, Southeast Asia nations is able to grab golden opportunity

and get many benefits from both U.S and China trade, however those nations’ hesitation in

choosing one, has raising up since both U.S and China are having trade conflict. Politically, U.S

and China rivalry is an issue which is very concerned for southeast Asia nation that is hard for

them to ensure and maintain its economic stability. However, it is believed that this trade conflict

will be come to and end soon and bring less bad impact and negative outcome which is not wanted

by anyone, except the positive which bring the advantage.

Word Count: 1740 words

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 V. References

Andrew Mullen. (2021, August 29). US-China Relations. Retrieved from US-China trade war
timeline: key dates and events since July ...: https://www.scmp.com/economy/china-
economy/article/3146489/us-china-trade-war-timeline-key-dates-and-events-july-2018
BCSB. (2021). Free and Open Indo-Pacific and The Quad. Phnom Penh: Bong Chansambath.
CISION. (2019, November 9). CISION. Retrieved from Impact of the US-China Trade War on
Southeast Asian ...: https://www.prnewswire.com/news-releases/impact-of-the-us-china-
trade-war-on-southeast-asian-countries-2019-report---focus-on-vietnam-malaysia-
singapore-300950889.html
Duc, A. (2019, december 09). Southeast Asia’s GDP growth to remain at 4.5 per cent in 2020.
Retrieved from https://vir.com.vn/southeast-asias-gdp-growth-to-remain-at-45-per-cent-
in-2020-72318.html
Elkommos, M. (2018, July 19). Linked in. Retrieved from Political Risks; Brexit and US China
Trade War - Impact on Financial Institutions: https://www.linkedin.com/pulse/political-
risks-brexit-us-china-trade-war-impact-mark-elkommos
European Bank. (n.d.). Belt and Road Initiative (BRI). Retrieved from Belt and Road Initiative
(BRI) - EBRD: https://www.ebrd.com/what-we-do/belt-and-road/overview.html
Menon, J. (2021, july 10). GLG. Retrieved from The Impact of the U.S.-China Trade War on
Southeast Asia Economies: https://glginsights.com/articles/the-impact-of-the-u-s-china-
trade-war-on-southeast-asia-economies/
Menon, J. (n.d.). GLG. Retrieved from The Impact of the U.S.-China Trade War on Southeast
Asia ...: https://glginsights.com/articles/the-impact-of-the-u-s-china-trade-war-on-
southeast-asia-economies/
Pramuk, J. (2018, June 15). POLITICS. Retrieved from Trump to slap 25% tariff on $50 billion
of Chinese goods - CNBC: https://www.cnbc.com/2018/06/15/trump-administration-to-
slap-a-25-percent-tariff-on-50-billion-of-chinese-goods-threatens-more.html