ASEAN Emerges as Economic Winner Amid Geopolitical Tensions
The Association of Southeast Asian Nations (ASEAN) has capitalized on the escalating trade tensions between China and the United States, solidifying its position as an economic powerhouse. According to the International Monetary Fund (IMF), the region has leveraged its strong trade links with both nations to strengthen its economy.
A History of Globalization
For decades, ASEAN has benefited from globalization, fostering robust trade relationships with China and the US, the world’s two largest economies. Despite deteriorating US-China relations, ASEAN has adapted and continued to integrate with the global economy.
Trade and Investment Links
The IMF’s latest Asia-Pacific Outlook report reveals that ASEAN economies have increased their market share of both Chinese and US imports since 2018. Foreign direct investment from both countries has also surged in ASEAN. The region has even taken advantage of trade diversion opportunities created by US-China trade tensions.
Export Growth and Trade Diversion
Empirical analysis shows that several ASEAN economies have experienced rapid export growth of products targeted by Chinese or US tariffs. Moreover, ASEAN has seen exports of these tariffed goods increase to countries outside China and the US, indicating economies of scale.
Intra-Regional Trade
Trade between ASEAN member states has also increased, contributing to the region’s growing share of inward foreign direct investment, world exports, and global value added.
Challenges Ahead
While some ASEAN members, such as Vietnam, have experienced strong export growth, others have seen slower or stagnant growth. The IMF warns that intensifying geopolitical pressures could harm the region in the future, potentially reducing activity in major trading partners and lowering external demand for ASEAN goods.
Asia-Pacific Growth Prospects
The IMF has raised its 2024 and 2025 growth prospects for the entire Asia-Pacific region by 0.1%. However, growth is facing increased risks due to rising geopolitical tensions, uncertainty about global demand, and potential financial volatility.
A Fragile Balance
As ASEAN navigates the complex landscape of global trade, it must balance its relationships with China and the US while mitigating the risks of economic fragmentation. The region’s ability to adapt and diversify will be crucial in maintaining its economic momentum.
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