Countries can build new trade links, resilience amid US tariffs and unpredictability: President Tharman
The US levies are spurring regional integration, he adds
[SINGAPORE] Tariffs imposed by the US have been a setback for Asia, and countries have to start thinking about creating opportunities and building resilience, said President Tharman Shanmugaratnam on Thursday (Oct 16).
“If the US tariffs are reconfiguring trade, we’ve got to reconfigure trade as well,” he said at a panel in Washington on shaping economic policies amid a shifting global landscape. “We do have agency. The middle powers and the smaller nations of the world have agency.”
President Tharman, who is on a working visit to the US, cited the possibility of a tie-up between the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – which groups 11 Pacific Rim economies and Britain – and the European Union, to help countries ride out current challenges.
“Just think of what’s possible... If the CPTPP and the EU start collaborating with each other, that’s about 42 per cent of world trade. If Asean and the EU start collaborating with each other, that’s more than a third of world trade,” he said.
In his remarks, Tharman noted that many Asian countries outside China were facing a double whammy of US tariffs and the diversion of Chinese exports from the US to other countries. He also cited two other challenges that could affect Asia’s growth: the onshoring of production into both the US and China, and the thinning out of the US-China trade corridor, which a lot of Asia’s growth has rested on.
“Let’s go for new trading arrangements that will allow developing countries in Asia to continue rising up the ladder of value-added... That’s the blessing of the US tariff move: It’s spurring regional integration, and it’s spurring bridges between regions,” he said.
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“We will end up, after a period of some difficulty and adjustment, with a new resilience,” he added.
Also on the panel, held at the International Monetary Fund (IMF) headquarters, were IMF managing director Kristalina Georgieva; European Central Bank president Christine Lagarde; Nasdaq chair and chief executive Adena Friedman; and Professor Gordon Hanson, Peter Wertheim Professor in urban policy at Harvard Kennedy School. The panel, moderated by Bloomberg’s Lisa Abramowicz, was held on the sidelines of the IMF and World Bank’s annual meetings.
Several panellists noted that while the global economy has been remarkably resilient in the face of US tariffs, countries should prepare to be tested by future shocks.
Dr Georgieva said strong fundamentals built over the past decades and good policies have paid off.
The private sector has also taken on a bigger role in the economy and become more agile.
And most countries hit by US tariffs, with the exception of China, have chosen not to retaliate.
“In the beginning, Canada retaliated. Everybody else said, ‘Thank you, but no, thank you. We don’t want a trade war. We prefer to retain trade as an engine for growth’,” Dr Georgieva said.
“I don’t know whether this resilience has been fully tested. Maybe this restraint on trade is not going to last,” she added.
Dr Georgieva observed that goods from China that were previously sent to America were now being redirected to Europe and Asia. She cited this as a risk should countries tax Chinese goods, saying: “Will that be managed still with patience, or could there be a downward spiral of tariffs?”
Meanwhile, Lagarde said collaboration will become increasingly important as there are risks of instability, with new technologies breaking into the financial system.
“It will be incumbent upon us – advanced economies, emerging economies, low-income countries – to agree on what will be the best way to cooperate in order to maintain financial stability, price stability, while helping with the development of growth which, hopefully, will be inclusive and sustainable,” she said.
The IMF recently upgraded its forecast for global economic growth in 2025, from 3 to 3.2 per cent, and for Asia’s growth in 2025, from 3.9 to 4.5 per cent.
It expects Asia to be at the centre of the worldwide trade policy reset, as the region remains the biggest driver of global growth, contributing an estimated 60 per cent in 2025 and 2026.
President Tharman was also asked by the moderator how much he saw people making rearrangements versus waiting for the US Supreme Court ruling on tariffs, to decide how much to move away from a US-driven model.
He said the unstated assumption in China and most Asian countries is that there will be continued unpredictability, and there has been a step change in the whole regime of global trade.
“Regardless of how the Supreme Court rules on this or that, you’re now in a more unpredictable situation. And it will be wise to start building alternatives: building new resilience by building new trade connections, and investing together to tackle the challenges of the global commons – even if it doesn’t include the US for now,” Tharman said.
“We just can’t wait to see what eventually happens. We’ve got to start making alternative plans and, in the meantime, keep our relations with the US as best as we can... It’s still a major market, and it’s got the most innovative companies in the world,” he added. THE STRAITS TIMES
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