00:00Well, Deborah Elms is the head of policy at the Heinrich Foundation.
00:06I would say the United States, and particularly the U.S. consumer, is about to be hit quite hard
00:11from all of these tariffs against the rest of the world that are now going to affect U.S. consumers
00:16and U.S. businesses. But the damage will not be just in the United States. The damage, I think,
00:21is going to flow to especially a lot of developing countries that have very high tariffs imposed.
00:25And given the complete collapse in trade or trade in goods between the U.S. and China,
00:31I think there will be fallout in both markets as a result of this escalating tariff war that we're in.
00:39Can regional trade agreements such as RCEP, which involves 15 Asia-Pacific countries,
00:44help cushion the blow of tariffs?
00:46I think more than ever, as long as the members in groupings like RCEP agree or at least maintain
00:54openness to one another, the challenge will be if the response to U.S. activity is that others
01:00close markets to non-U.S. markets. In other words, potentially inter-regional or inter-Asian trade
01:07gets shut down as well. That will become an even bigger problem. But I think what helps avoid that
01:13challenge is things like an RCEP or the counterpart CPTPP, Comprehensive and Progressive Trans-Pacific
01:20Partnership, that is 12 countries that are also linked by a trade agreement. Those are the kinds
01:25of things that you're going to be looking to now for some lowering of risk and increase in
01:30certainty about trade rules.
01:32And of course, while the fight and the tit-for-tat is very much between China and the USA,
01:37because they're the world's two biggest economies, we are seeing other Southeast Asian nations
01:41hit by heavy duties. Cambodia, 49 percent. Vietnam, 46. Indonesia, 32. Does this effectively nullify
01:50the China plus one strategy, which was aimed at diversifying supply chains beyond China?
01:57Yes and no. I mean, if you diversified solely to access the U.S. market, then you could potentially
02:03be in trouble now because 46 percent on Vietnam makes those products often uncompetitive, but not
02:10always. So I think that is a challenge. But much of the diversification in the China plus one strategy
02:15was also about having products ready for the rest of the world. The rest of the world at the moment
02:21remains open and also for reducing reliance on any single market. So even Chinese firms diversified to
02:29lower the risks of challenges domestically that would cripple a firm. And so I think it's not the
02:35end of China plus one. It's not the end of supply chains or trade. It's just that we are we are rapidly
02:40changing supply chain footprints and final markets in ways that maybe we would never have imagined we
02:48would be thinking if it was just a few months ago. Do you see these tariffs as short-term shocks
02:53or could they herald a fundamental change in economic thinking around globalization?
03:00I would like to say short-term, but the experience with imposing tariffs is that they tend to be very
03:06sticky. And sometimes you end up, as an example, in the United States, there were tariffs imposed in
03:12World War II that are still in place. So decades or even potentially a century later, you may still be
03:19grappling with tariffs that were imposed. So I think we may find that many of the tariffs imposed in April
03:25of 2025 end up sticking around for far longer than any of us imagined.
