U.S.-China trade war could affect supply chain in Asia-Pacific

U.S. President Donald Trump, left, reacts as Chinese President Xi Jinping waves to business delegates during a business event at the Great Hall of the People in Beijing, Thursday, Nov. 9, 2017. Trump is on a five-country trip through Asia traveling to Japan, South Korea, China, Vietnam and the Philippines. (AP Photo/Andy Wong)

Hong Kong, June 20 (CNA) If a trade war between the United States and China breaks out, the industrial supply chain in the Asia-Pacific region is expected to feel the pinch of the impact resulting from the simmering friction of the top two economies in the world, according to an economist with Bank of China (Hong Kong).

Meanwhile in Taipei, a national security conference presided over by President Tsai Ing-wen (蔡英文) discussed the latest trade dispute between the U.S. and China on Wednesday.

According to the conclusion of the conference, Taiwan should come up with appropriate measures to take on a possible restructuring of the industrial supply chain in the wake of the U.S.-China trade tension.

The conference noted that the role of Taiwanese investors in the regional supply chain could change drastically.

Taiwan should prepare itself well as the trade war between the world’s two largest economies could affect the trilateral ties among Taiwan, China and the U.S., the conference concluded.

In an interview with CNA Tuesday, Tse Kwok Leung (謝國樑), head of the bank’s policy and economic research division, said that after years of business ties with the United States, many manufacturers in Taiwan, China, Hong Kong and Japan, as well as the Association of Southeast Asian Nations, have formed close global supply chains with U.S. brands.

Tse said that if a trade war between Washington and Beijing breaks out, Asian firms in the U.S. supply chain could be hurt.

Tse made the comment as trade friction between the U.S. and China has been escalating.

Last week, U.S. President Donald Trump announced that the U.S. will impose an additional 25 percent tariff on Chinese goods worth US$50 billion, such as machinery, robotics, aerospace items, information technology devices and auto products, starting July 6.

In retaliation, China announced that a 25 percent tariff will be imposed on U.S. goods, including soybeans and electric vehicles, worth US$34 billion, also starting July 6. Another list of U.S. goods worth US$16 billion will be subject to review before being applied.

On Monday, Trump also threatened to impose a 10 percent tariff on US$200 billion-worth of Chinese goods, which sent ripples through global financial markets. Soon after Trump’s threats, China’s Ministry of Commerce issued a response, saying that the latest threat of more tariffs violates previous negotiations and consensus reached between the U.S. and China.

Judging from the latest development, Tse said it is highly possible for a trade war to erupt. How such a trade war will evolve will depend on whether or how both sides will intensify efforts to fuel trade disputes in the near future.

Once a trade war breaks out, it will be a lose-lose situation for both the U.S. and China in the short term, Tse said, while firms in the supply chain will also fall victim.

But in the longer term, Tse suggested that China should seize the trade dispute with the U.S. as an opportunity to reform its industrial structure and adjust its export portfolio in an effort to improve its economy.

(By Stanley Cheung, Yeh Su-ping and Frances Huang)