00:00Right, we are still unpacking Trump's tariffs and its implications, especially within this region.
00:06Now, many in Asia, especially within ASEAN, are left wondering how to interpret this move.
00:11Is maintaining neutrality still a viable option amid escalating U.S.-China trade tensions?
00:17And what does it mean for smaller trade-dependent economies in the region?
00:22Now, here to help us is Professor Chandra Mugen-Tangavelu, head from the Jeffrey Chia Institute of Southeast Asia.
00:28Thank you so much for joining us.
00:31Now, let's tackle the first question, which is, how should Asia, especially ASEAN, interpret this move right now?
00:38Is neutrality no longer an option in U.S.-China trade tensions, considering the new development?
00:45Well, neutrality is always the main focal point and the only equilibrium we have.
00:50The reason is what Trump has done is created a higher level of uncertainty and higher level of risk in the global trade itself,
01:01which basically means that you can't move to the right or the left,
01:05which means that neutrality and defensive position is the right way,
01:09and coalition is still the right way to manage the impact of differential tariff rates
01:15and using weaponizing trade and tariff as a means to achieve the other objective
01:24that doesn't come into the space in terms of trade and how we do business and so on and so forth.
01:33It creates a lot of uncertainty, higher level of risk, and added another institutional risk
01:38in terms of how we can conduct business in the U.S. itself.
01:43And it's not just trade within countries, but also the multinationals have to unpack
01:48the real intention of what Trump is trying to do
01:51and incorporating the institutional risk into the future investment decisions itself.
02:00That makes it very difficult to actually put a premium, exactly what Trump is trying to do.
02:07So neutrality is still the right way to go.
02:10That will mitigate many things businesses want to do.
02:14Think of the future.
02:16Think of the five-year plan and medium to long-term plan.
02:21And keep it in that plan will be the right strategy and not to fall into this trap,
02:27which Trump is actually trying to put a lot of traps and a lot of booby traps around,
02:34which basically means that three months ago it was 10 percent and three months after it was 20 percent.
02:40And then he will increase the rate in not very constructive, in a very clear manner.
02:49That's what the rule-based, market-based trading regime needs.
02:54He's weaponizing trade and then in some way he's also legalizing rent-seeking,
03:02which basically means no country knows what the other deals that the other country has made,
03:07which is against the MFN principle itself.
03:09So the question is neutrality, yes.
03:13ASEAN centrality and neutrality is important.
03:16ASEAN should still keep the focal point of the 85 percent trade that will give the baseline for them.
03:22And strengthen that base is very critical for them.
03:25And fairly, the other 25 percent, 20 percent trade with U.S.,
03:31fairly they have to mitigate the risk as much as possible.
03:34Right, Prof.
03:35We talk about, especially if you zone in into this region,
03:38what are the likely spillover effects for small trade-dependent economies?
03:42For a small open economy, you need a rule-based trading regime to actually maintain the rule
03:52and to engage larger economies itself.
03:55So you don't have that rule, and as I mentioned before, you will end up the corner solution.
04:02It's not just the corner solution in trade,
04:04but a lot of other geopolitical issues will be incorporated in that element.
04:10That's what I meant by legitimizing and legalizing rent-seeking.
04:18And when you go to that corner, you're going to see a lot of uncertainty and a lot of risk.
04:22So for small open economies, still the rule-based and market-based trading regime is the right way to go.
04:28And the way ASEAN centrality and ASEAN is built its focal points in terms of rule-based,
04:33market-based, and WTO principle is the key, which is actually 80 percent of our total trade.
04:38So fairly, we need to find a substitute for the next 20 percent.
04:42So it's a short-run scramble to manage the mitigation effects.
04:49But fairly, from a multinational point of view, there will be less decoupling effects
04:54because it's very difficult to understand how Trump is going to change his baseline tariff in the next three to four months.
05:01Right. Thank you so much, Prof, for your analysis.
05:04We're looking forward to more developments on this.
05:07Thank you so much.
05:08Right.
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