Trump is building a trade wall, and the developing world will pay for it

The incoming U.S. administration is proposing a “border tax” that will act like a tariff on imports and a subsidy on exports. This expression of mercantilism will cut global supply chains that terminate in the U.S., while promoting those that originate there. It negates decades of globalization and threatens economic growth and poverty reduction, especially in Asia.
All U.S. eyes have been on Mexico, predictably enough, as the president-elect rants on Twitter against proposals to move U.S. manufacturing jobs there. But E/SE Asian economic growth and regional economic integration have been two of the largest global economic phenomena in the past 20 years. Importantly, much of this growth has been built around supply chains that terminate in the U.S., which remains the most important market for Asian exporters—whether directly, or via regional assembly hubs like China.
The attenuation of supply chains that terminate in the world’s largest market has the capacity to greatly slow the growth of much E/SE Asian manufacturing and reduce new investments in that sector. Manufacturing job growth has been the driver of improvements in labor productivity, and thus of per capita income. Since China and SE Asia are the two world regions that account for all global poverty reduction in the past generation (proportional gains in the other countries having been offset by population growth) we can expect a substantial widening of the income gap between rich and poor nations.
This will naturally be exacerbated if US and EU governments impose additional restrictions on South-North migration.
Also, slower world growth plus a planned U.S. fiscal stimulus that will presumably raise US interest rates will drain capital from the developing world—most quickly from E/SE Asia, the region that will lost its major export market. This will further reduce Asian growth rates and poverty reduction.
For these reasons the IMF’s updated predictions of world and Asian growth must surely be overoptimistic . Trump is proposing to build a trade wall around the world’s largest market, and workers in emerging nations—especially those in low-middle income Asia—will pay for it.
Among the many interesting questions that arise, for Asia perhaps the most compelling one is this: if these external measures really do kick away the ladder of economic and social mobility, we will then begin to find out how robust are the political regimes of countries like China and Vietnam, whose longevity has surely depended, at least in part, on delivering a consistent high rate of economic growth (see: Thailand).

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