Impacts and responses to a global trade war
East Asia Bureau of Economic Research
Abstract
EABER and CSIS have partnered to model the likely effects of the prospective US tariff regime, a global trade war and the possible responses by ASEAN to that war. We find:
The US tariffs will have material impacts • The current US tariff regime and response by China and Canada is likely to result in a -0.6% decline in GDP across ASEAN nations (Scenario A). In line with current policy, there is limited rationale for large-scale retaliation by ASEAN nations.
RCEP's best response is to work multilaterally • By unilaterally holding current tariffs levels to the rest of the world and fully and immediately implementing RCEP agreements within the bloc (Scenario C1 – Fully Implement), ASEAN's GDP is estimated to be +13.0% higher compared to the global contagion trade war scenario.
Raising tariffs in response will worsen the impacts • Under a global contagion (Scenario B) where all nations erect 15% tariffs on each other, ASEAN GDP will fall dramatically (-11.1%) and employment effects will be very substantial (-24.7%). All ASEAN countries will be negatively affected. • Further liberalisation by RCEP establishing bilateral FTAs with India and the EU (Scenario C2) can provide for further growth (+14.1% GDP compared to trade war). • RCEP undertaking broader bilateral liberalisation (Scenario C3) with the rest of the world (minus US) unlocks further gains (+14.6% GDP compared to trade war).
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