In the first of our short notes on "The Economics of Mr Trump" we look at trade and developments in South East Asia. A "Coup for China and a setback for Uncle Sam", that's how analysts react to the world's largest trade deal that excludes the USA.
One of the first steps of the Trump administration, was to walk away from the Trans Pacific Partnership. The executive order signed in January 2017 effectively reversed the Obama decision to form a trade alliance with eleven pacific rim partners.
The partnership included the US, Canada, Japan, Australia, New Zealand, Chile and Peru. Without the USA, the partnership foundered, creating a vacuum, into which China was keen to make the move
Now, China and 14 other East Asian countries have signed one of the largest ever free trade deals, encompassing almost a third of the world’s population and a third of economic output.
Nations including Japan, South Korea, Australia and New Zealand agreed the Regional Comprehensive Economic Partnership, [RCEP] with the ASEAN group. The deal cuts tariffs and increases market access across some of the world’s most dynamic economies. The signing, cemented the RCEP, as the largest trading bloc in the world covering a market of 2.2 billion people and $27 trillion of global output.
The trade deal is larger than the North American USMCA ($23.4 trillion) and the European EU ($17.6 trillion). The global centre of economic gravity keeps pushing relentlessly to the East. Forecasts are for the area to account for almost 50% of world economic activity in the future. India may well join within the next five years.
The RCEP will boost Asian economies by reducing tariffs, implementing new online trading rules and bolstering supply chains with common “rules of origin”. The deal means a RCEP compliant product will now be able to access 15 countries on beneficial terms. It also marks the first free trade deal between China, Japan and South Korea — key rival powers in the region.
The 10-member Association of Southeast Asian Nations signed the mega deal with the region’s top trading partners China, Japan, South Korea, Australia and New Zealand. ASEAN is made up of Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Cambodia, Myanmar, and Laos.
The move will consolidate Chinese power, as the world’s second largest economy. China is expected to overtake the USA as the largest economy in the world within ten years. The Renminbi is being readied to step up as a reserve currency in the years ahead. The demise of the dollar accelerates as China reduces Dollar holdings and transitions to the Yen.
So much for the The Economics of Mr Trump and America First. Next week we look at the impacts of Trump's tariffs and trade policy on the US economy ... Don't Miss That!
That's all for this week! Have a great, safe, week-end ... Hands, Face and Space ...
The Saturday Economist
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