Silver lining in the dark cloud

PRESIDENT Donald Trump is ready to scale up the trade war by imposing tariffs on US$505bil worth of goods from China.

This has rattled stock markets across the world with German Chancellor Angela Merkel describing the situation as “very serious” and that it requires a quick solution.

China in return has so far devalued the yuan, which is the text book solution when a country faces trade wars. The yuan may depreciate now and appreciate a year later – depending on the relationship between the US and China.

Meanwhile, the manufacturers in China are not taking chances. They are looking at re-locating their factories to countries in the region. They feel that the trade war will be a long-term affair and impact their operations.

The trade war has also expedited the plans by some manufacturers to re-locate their operations due to the rising wages in China.

Heading the list of countries that manufacturers from China are re-locating are places where wages are generally lower such as Vietnam and Myanmar. It has been reported that some 30 manufacturers are already heading to Myanmar to look for suitable places to start factory operations.

It would be not be long before manufacturers from China start looking at countries such as Malaysia and Thailand where the rule of law is followed and manufacturers are well supported by good infrastructure.

The trade war has its positives although as a whole it is bad for global trade.