Experts allay US-China currency war fears
Trump-free future not an end to clash
The tit-for-tat trade war between the US and China is likely far from over, but is unlikely to be spill over into a currency war, say trade analysts.
Speaking at a seminar on “The trade war: threats or opportunities for Thailand” held by the International Trade Promotion Department, Kirida Bhaopichitr, research director at Thailand Development Research Institute, said the trade row will be prolonged even if Donald Trump loses in the upcoming election.
“The Belt and Road Initiative, which will link China to Europe, and the Made in China 2025 policy that aims to make China a technology exporter will promote China’s influence over other countries beyond the US,” she said. “No matter who is the US president from 2020, US concern over China’s influence will continue, leading to new measures to obstruct China in the future.”
Ms Kirida said the trade war hit Thailand’s exports and tourism hard, resulting in exports falling nearly 3% in the first half this year.
A strong baht since late last year, boosted by a hefty current account surplus and a weakened yuan, also damaged Thai export competitiveness, she said.
“China’s move to let the yuan fall to its lowest level in 11 years has sparked fears over a possible currency war, but that is unlikely as the Chinese administration is trying its best to shore up the yuan,” said Ms Kirida.
Joe Horn-Phathanothai, chief executive of Strategy613, a strategic consultancy, agreed with Ms Kirida, saying China will remain a focal point for the US administration no matter who is the US president from 2021.
The US’s new administration may not opt for tariffs on Chinese imports as a key weapon.
“The US’s ongoing efforts aim not only to reduce its trade deficit with China but also narrow the gap between China’s economic growth and the US’s. The US is expected to carry on with this strategy over the next 30 years until the gap between China and US economic growth stays at 0.3% to 0.5%, from about 4% this year,” he said.
According to Mr Joe, the trade war may develop eventually into an ideological war given the different outlooks and form various proxy wars for the two countries to fight each other indirectly.
Commerce permanent secretary Boonyarit Kalayanamit said the trade row is expected to be prolonged and expand beyond international trade, having begun to develop into a technology and international finance war.
“China and the US are both economically powerful countries and Thailand is a vital part of the world’s supply chain. An impact is inevitable,” he said, adding Thailand needs to keep a close watch on an influx of cheap products.