WEBVTT - Trump 2.0 Set to Upend Regional Trade 0:00:02.400 --> 0:00:06.320 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:06.320 --> 0:00:09.600 that explores the big ideas in trans moving money across 0:00:09.600 --> 0:00:12.200 the region. I'm John Lee in Hong Kong, and I'm. 0:00:12.080 --> 0:00:13.920 Katidmitriva, also in Hong Kong. 0:00:14.240 --> 0:00:18.360 Katya, were literally days away from President Trump being inaugurated. 0:00:18.560 --> 0:00:21.439 Yeah, that's right, full disclosure. We're recruiting this a week 0:00:21.440 --> 0:00:24.560 in advance. But yes, right now as the listener is listening, 0:00:24.600 --> 0:00:27.680 we're a few days away from January twentieth and the inauguration, 0:00:28.480 --> 0:00:31.720 and I mean something we've been looking forward to for 0:00:31.760 --> 0:00:35.120 a while. Last time around, it was chaotic in DC, 0:00:35.640 --> 0:00:38.120 but I think it was probably even more chaotic here 0:00:38.159 --> 0:00:38.520 in Asia. 0:00:39.360 --> 0:00:42.120 Absolutely, right. A lot of the Asian economies bore the 0:00:42.120 --> 0:00:45.639 brunt of the protectionist policies, namely China, but there were 0:00:45.640 --> 0:00:47.960 also some countries that benefited. 0:00:48.479 --> 0:00:50.880 Yeah, there were a lot of countries in Southeast Asia 0:00:50.960 --> 0:00:54.640 in particular. I mean you look to Vietnam and Malaysia 0:00:55.200 --> 0:00:58.320 and some of these countries where a lot of production shifted, 0:00:58.440 --> 0:01:02.120 and this time they might actually be in the crosshairs. 0:01:02.440 --> 0:01:04.840 That's right, And today we have the perfect guest to 0:01:04.920 --> 0:01:08.800 discuss all these issues. We have soul No Varma, chief 0:01:08.800 --> 0:01:12.560 economists for the Asia Pacific Extra PAN region at MURA, 0:01:12.800 --> 0:01:13.759 based in Singapore. 0:01:14.280 --> 0:01:18.000 Sauna welcome, Thank you, Verma, John and Katya. Pleasure to 0:01:18.040 --> 0:01:18.400 be here. 0:01:18.600 --> 0:01:22.960 Great to have you here. You began covering Asia economies 0:01:23.640 --> 0:01:26.959 kind of in mid twenty nineteen. You had covered some before, 0:01:27.000 --> 0:01:29.920 but of course your role expanded. Basically it was in 0:01:29.959 --> 0:01:32.720 the heart of the first trade war. So just to 0:01:32.720 --> 0:01:35.039 give us an idea, I mean, what was that time, like, 0:01:35.240 --> 0:01:37.679 give us maybe a preview of what we should expect 0:01:37.720 --> 0:01:38.919 in the next four years. 0:01:39.440 --> 0:01:43.760 Yeah, I think the bottom line has buckled up. I 0:01:43.800 --> 0:01:47.600 think you know, back then it clearly appeared off way 0:01:47.640 --> 0:01:53.480 elevated uncertainty, uncertainty with respect to what really Trump stood for, 0:01:53.880 --> 0:01:56.440 whether it was just campaign rhetoric or we would see 0:01:56.440 --> 0:02:00.000 implementation of some of the threads. Then there was uncertain 0:02:00.280 --> 0:02:03.520 with respect to the timing of when the tariffs would 0:02:03.560 --> 0:02:07.120 be imposed, the tit for tat retaliation that we saw 0:02:07.160 --> 0:02:12.840 between US and China, China's currency weakening, its pillovers onto Asia, 0:02:13.520 --> 0:02:16.160 and as you said, I mean we did see losers 0:02:16.160 --> 0:02:20.320 and winners from US China trade tensions. And you know, 0:02:20.360 --> 0:02:23.760 when we talk about the countries that were losers. It 0:02:23.840 --> 0:02:25.920 was not just China. In fact, it was some of 0:02:25.919 --> 0:02:29.080 the more open economies in the region that were hurt 0:02:29.440 --> 0:02:33.080 by much more than China. But there were winners in 0:02:33.160 --> 0:02:37.919 Southeast Asia from trade diversion, some countries actually even outside 0:02:37.919 --> 0:02:41.320 Southeast Asia, which benefited from reshoring of some of the 0:02:41.480 --> 0:02:45.160 production supply chains. And of course the relocation and the 0:02:45.240 --> 0:02:49.440 China plus one strategy that has gained traction and continues 0:02:49.480 --> 0:02:51.680 to gain traction. So we'll see a lot of this 0:02:52.160 --> 0:02:56.399 for sure in the next four years. But I think 0:02:56.400 --> 0:02:58.240 there are also a few things that are a bit 0:02:58.280 --> 0:03:02.800 different this time. You know, back during Trump one point, oh, 0:03:02.840 --> 0:03:06.800 it took almost one year for the tariffs to get implemented. 0:03:07.120 --> 0:03:10.680 This time around, you know, our view is he's going 0:03:10.720 --> 0:03:14.480 to implement the tariffs fairly quickly. Obviously, the tariffs are 0:03:14.520 --> 0:03:16.880 also not just on China. You know, the threat is 0:03:16.919 --> 0:03:20.160 across the board this time around, so that's quite different 0:03:20.320 --> 0:03:23.400 to his first term. I would say Asia is also 0:03:23.400 --> 0:03:25.760 a bit more prepared this time, so when you look 0:03:25.800 --> 0:03:30.760 across the region, you actually see policymakers preparing for different scenarios. 0:03:31.440 --> 0:03:34.680 You know, do we buy more energy from US, do 0:03:34.720 --> 0:03:38.280 we buy more defense from US. Should we be lowering 0:03:38.280 --> 0:03:43.720 some of our import tariffs. 0:03:41.680 --> 0:03:45.000 Preemptively trying to keep Trump happy preemptively. 0:03:45.760 --> 0:03:48.680 Well, they're preparing for scenarios. They don't know what exactly 0:03:48.760 --> 0:03:53.120 to expect. So Asia is clearly preparing this time. But 0:03:53.200 --> 0:03:55.880 I do think, you know, trade diversion as we saw 0:03:56.000 --> 0:03:58.160 during the first term is not going to be as 0:03:58.240 --> 0:04:01.120 easy this time. I mean, there's talk about plugging some 0:04:01.200 --> 0:04:05.320 of the loopholes in terms of the trade diversion that's 0:04:05.560 --> 0:04:09.080 taken place. And from a more macro perspective, you know, 0:04:09.120 --> 0:04:13.880 what's different is really US is entering the second Trump 0:04:13.920 --> 0:04:18.080 presidency with a very high inflation and that makes the 0:04:18.120 --> 0:04:21.719 sort of US macro environment a lot more challenging from 0:04:21.839 --> 0:04:25.560 Asia's perspective as well, in terms of FED policy, and 0:04:25.640 --> 0:04:30.000 also China economically is much weaker today in fact countries, 0:04:30.400 --> 0:04:32.880 you know, bearing some of the adverse impact from its 0:04:32.920 --> 0:04:35.560 over capacity. So some things are similar, but there are 0:04:35.560 --> 0:04:38.120 also a few things that seem to be a bit different. 0:04:39.200 --> 0:04:42.159 And you did mention how inflation is elevated in the 0:04:42.240 --> 0:04:45.720 US and despite all what you know, the incoming Trump 0:04:45.720 --> 0:04:50.120 administration is saying. I think they probably know that tariff's 0:04:50.160 --> 0:04:55.000 increases inflation. Do you think that they will actually, you know, 0:04:55.120 --> 0:05:00.120 to a widespread ten to tariff across all imports. Do 0:05:00.160 --> 0:05:02.280 you think it's going to be less? And what do 0:05:02.279 --> 0:05:03.640 you think they're going to impose on China? 0:05:04.360 --> 0:05:07.279 You know, that is actually the million or billion dollar 0:05:07.480 --> 0:05:09.919 question right now, and there is clearly a lot of 0:05:10.000 --> 0:05:13.680 uncertainty around this. The question is whether this is just 0:05:13.720 --> 0:05:18.120 a negotiating ploy or we will actually see an implementation. 0:05:18.760 --> 0:05:22.440 What's very clear is that trade policy is at the 0:05:22.520 --> 0:05:26.800 forefront of Trump's agenda. It's actually something he's believed in 0:05:27.480 --> 0:05:31.560 you for many, many decades actually, and the agenda is 0:05:31.600 --> 0:05:36.360 really to get us manufacturing back, to get some of 0:05:36.400 --> 0:05:40.080 the jobs back into the US and really reduce the 0:05:40.200 --> 0:05:46.320 reliance on China. And his focus is on reducing the 0:05:46.480 --> 0:05:49.440 trade imbalance that is built up between US and rest 0:05:49.440 --> 0:05:52.360 of the world. You know, China, Mexico, Vietnam. These are 0:05:52.360 --> 0:05:56.080 obviously there in the top countries which run a large 0:05:56.160 --> 0:05:58.280 trade surplus with the US, but there are a lot 0:05:58.279 --> 0:06:01.520 of other countries as well. So I think we should 0:06:01.560 --> 0:06:05.960 take what he's saying more seriously. There are trade offs 0:06:06.120 --> 0:06:08.840 even for the US in terms of, as you say, 0:06:08.960 --> 0:06:12.680 the risk of higher inflation from the implementation. But if 0:06:12.720 --> 0:06:17.760 the game plan is medium term getting more resilient US back, 0:06:18.440 --> 0:06:22.159 then the implementation is quite likely. So I mean, our 0:06:22.240 --> 0:06:26.039 base case at Nomera is that he is likely to 0:06:26.120 --> 0:06:30.360 follow through on his campaign rhetoric. So we're expecting these 0:06:30.440 --> 0:06:35.640 sixty percent tariff on China and around ten percent on 0:06:35.800 --> 0:06:38.760 the rest of the world, and the implementation we think 0:06:39.040 --> 0:06:41.279 will be fairly quick. It's not going to be delayed 0:06:41.279 --> 0:06:44.640 as was the case in the first term, and you know, 0:06:44.680 --> 0:06:47.840 should get implemented through the course of twenty twenty five. 0:06:48.360 --> 0:06:50.560 So yes, I think we need to be prepared. 0:06:51.240 --> 0:06:53.960 So now you mentioned something there just now before moving 0:06:53.960 --> 0:06:56.800 on to broader Asia. You know, it might seem obvious, 0:06:56.839 --> 0:07:00.360 but I think it's worth exploring this idea that Trump 0:07:00.400 --> 0:07:03.600 wants to reduce the US reliance on China. But as 0:07:03.600 --> 0:07:06.320 an economist, you know, I wanted to ask is that 0:07:06.360 --> 0:07:10.360 even possible? Because yes, imports into the US from China 0:07:10.400 --> 0:07:14.000 have gone down since twenty eighteen, But I mean, you 0:07:14.080 --> 0:07:16.520 have to think about transshipments, you have to think about 0:07:16.600 --> 0:07:20.360 parts that are in other goods. Is it really even 0:07:20.400 --> 0:07:23.840 possible to cut China out as much as he's hoping to. 0:07:24.920 --> 0:07:28.920 It's not at all easy, and what we've seen in 0:07:28.960 --> 0:07:33.960 the last twenty class years is just how vital China 0:07:34.240 --> 0:07:39.200 is in the entire global supply chains. In fact, I mean, 0:07:39.320 --> 0:07:41.400 I would say, actually meaning off China is going to 0:07:41.400 --> 0:07:44.040 be extremely difficult. Even you know, when we think of 0:07:44.120 --> 0:07:47.840 countries like Vietnam, for instance, if a textile manufacturing has 0:07:47.960 --> 0:07:52.560 moved to Vietnam, they are still importing the buttons from China. 0:07:53.160 --> 0:07:56.480 So China is so critical in terms of the supply 0:07:56.880 --> 0:08:00.080 of these intermediate products that it's actually going to be 0:08:00.240 --> 0:08:02.640 very difficult. Like even if you move the supply chain 0:08:03.080 --> 0:08:07.240 out of China, these new emerging supply chains actually still 0:08:07.240 --> 0:08:11.080 depend on China to make these intermediate products. So it's 0:08:11.160 --> 0:08:15.240 going to be tough. Now. I think specifically for US, 0:08:15.280 --> 0:08:18.560 you know, their focus is a lot more on some 0:08:18.960 --> 0:08:22.520 specific product categories. I don't think US is trying to 0:08:22.560 --> 0:08:26.840 bring Doyt manufacturing back, right, so you know, when it 0:08:27.000 --> 0:08:30.320 comes to some of the low tech manufactured products or 0:08:30.360 --> 0:08:34.880 mid tech manufactured products, there's still space for these supply 0:08:35.040 --> 0:08:40.280 chains to be outside US. But there are specific products, 0:08:40.360 --> 0:08:43.600 particularly ones that are you know, of importance from a 0:08:44.000 --> 0:08:50.959 national security and from a more strategic perspective, whether it's steel, semiconductors, 0:08:51.679 --> 0:08:55.120 and you know, areas where US wants to focus on, 0:08:55.440 --> 0:08:59.160 could be auto's, some of the green tech products. Those 0:08:59.280 --> 0:09:02.160 are the supply chains where there is clearly a lot 0:09:02.200 --> 0:09:06.920 more focus to actually get manufacturing back. So so yeah, 0:09:06.960 --> 0:09:07.560 it's tricky. 0:09:07.960 --> 0:09:11.320 You also mentioned another interesting fact you've mentioned. Under Trump 0:09:11.480 --> 0:09:14.920 one point zero, there's a lot of reshuring which benefited 0:09:15.040 --> 0:09:17.880 you know, obviously countries like you know, Vietnam, Malaysia, But 0:09:17.920 --> 0:09:19.760 you mentioned that it's going to be a lot more 0:09:19.800 --> 0:09:23.080 difficult this time around. Can you explain and does that 0:09:23.240 --> 0:09:27.520 mean that maybe Southeast Asia will not benefit as much 0:09:27.640 --> 0:09:29.200 as previously thought. 0:09:30.160 --> 0:09:34.000 I think the one interesting thing actually this time around 0:09:34.360 --> 0:09:39.600 is the focus on some of the third countries that 0:09:39.800 --> 0:09:43.640 have been used to bypass trade tariffs. So, for instance, 0:09:43.679 --> 0:09:47.000 if you look at the trade between US and China, 0:09:47.840 --> 0:09:50.760 China's exports to the US or China's shared and US 0:09:51.080 --> 0:09:56.600 imports has declined, which was basically the objective, But we 0:09:56.760 --> 0:10:01.079 have seen an increase in the share of exports from 0:10:01.559 --> 0:10:05.480 Mexico and from Vietnam in some cases. I won't say 0:10:05.480 --> 0:10:08.680 this is true in all, but in some cases actually 0:10:08.720 --> 0:10:13.280 the local value edition that is being done by some 0:10:13.400 --> 0:10:16.920 of the manufacturers in these countries is not very high. 0:10:16.960 --> 0:10:20.920 So there is a clear case of bypassing tariffs that 0:10:21.000 --> 0:10:24.280 has been done, and this is something that is in 0:10:24.440 --> 0:10:28.600 focus in the second Trump presidency. Now I don't think 0:10:28.640 --> 0:10:30.880 it's going to be very easy to implement this, like 0:10:31.040 --> 0:10:35.760 how do you you know, exactly estimate which product is 0:10:35.800 --> 0:10:39.160 seeing more valuation versus you know, less valuation. And it's 0:10:39.240 --> 0:10:42.480 extremely complicated because we're talking about, you know, not at 0:10:42.480 --> 0:10:45.160 a country level, it's at a product level, and then 0:10:45.200 --> 0:10:47.880 within a product there are different kinds of products. So 0:10:48.200 --> 0:10:51.400 implementation is going to be very difficult. But basically, the 0:10:51.440 --> 0:10:55.679 countries that have benefited purely because of trade diversion and 0:10:55.800 --> 0:11:00.000 no additional local valuation could be at risk of tariff 0:11:00.440 --> 0:11:04.880 in this second Trump presidency. But it also I think 0:11:05.320 --> 0:11:09.040 there is still space for countries actually to benefit. So, 0:11:09.160 --> 0:11:14.240 for instance, countries where the local valuation is much higher 0:11:14.600 --> 0:11:18.199 can still benefit in the second Trump presidency. Some of 0:11:18.240 --> 0:11:22.600 the low tech manufactured products or the mid tech manufactured 0:11:22.600 --> 0:11:26.880 products where supply chains are still shifting, there are countries 0:11:26.880 --> 0:11:30.000 that can actually still benefit. So we had actually done 0:11:30.000 --> 0:11:34.720 a report in mid twenty twenty four looking at basically 0:11:34.800 --> 0:11:38.960 data for about seventeen eighteen months, covering about a sample 0:11:39.000 --> 0:11:43.080 of one hundred and thirty companies to basically identify which 0:11:43.160 --> 0:11:47.280 countries were actually benefiting from supply chain shifts. You know, 0:11:47.320 --> 0:11:49.880 we'd done a similar study back in twenty nineteen, and 0:11:49.920 --> 0:11:53.200 then we updated the study in twenty twenty four. So 0:11:53.240 --> 0:11:56.040 what was interesting is that during the twenty nineteen study, 0:11:56.080 --> 0:11:59.400 it was actually largely Vietnam that was benefiting from the 0:11:59.400 --> 0:12:02.400 supply chain in shifts. But in the more recent study 0:12:02.480 --> 0:12:06.079 that we did, actually India emerged as the biggest beneficiary 0:12:06.120 --> 0:12:10.160 from these supply chain shifts that are ongoing in sectors 0:12:10.280 --> 0:12:14.319 like electronics. Obviously smartphones is one sector where India is benefiting, 0:12:14.640 --> 0:12:18.000 but also Malaysia which is up and coming in terms 0:12:18.080 --> 0:12:23.520 of again electronics, in data center, in semiconductor assembly and testing. 0:12:24.040 --> 0:12:27.080 And what's interesting is that you know who's investing in 0:12:27.120 --> 0:12:30.800 these countries. So unlike Vietnam, where a lot of the 0:12:30.840 --> 0:12:34.360 investments have also come from China, in India, bulk of 0:12:34.400 --> 0:12:38.600 the investments have actually been from US, European or Developed 0:12:38.640 --> 0:12:43.240 Asian multinational companies. Similarly, in Malaysia, it's a bit more mixed, 0:12:43.679 --> 0:12:46.760 So I think there will still be beneficiaries, but obviously 0:12:46.960 --> 0:12:48.959 the loopholes are going to get closed. 0:12:49.520 --> 0:12:53.400 Yeah, you mentioned the loopholes there. There was a Harvard 0:12:53.760 --> 0:12:57.080 business paper that I was reading that estimated that it 0:12:57.120 --> 0:13:01.480 was about sixteen percent. One six up to sixteen percent, 0:13:01.559 --> 0:13:04.760 I should say, of goods that were shipped from Vietnam 0:13:05.360 --> 0:13:08.960 to the US were actually that transshipment that you're talking about. 0:13:09.000 --> 0:13:13.280 In other words, it wasn't necessarily anything that local manufacturers 0:13:13.280 --> 0:13:16.360 were adding value. It was purely putting it in a box, 0:13:16.400 --> 0:13:18.680 slapping a label on it saying it was from Vietnam 0:13:18.720 --> 0:13:21.160 and not China. But to your point, it is so 0:13:21.440 --> 0:13:24.320 difficult to first of all identify that there's a whole, 0:13:24.320 --> 0:13:27.360 and it's not just difficult, but it's also a lengthy process. 0:13:27.800 --> 0:13:30.800 What is your assumption in terms of the perhaps the 0:13:30.840 --> 0:13:33.520 flow of tariffs. You know, we've been promised by Trump 0:13:33.920 --> 0:13:38.880 on day one tariffs potentially on Mexico and Canada. We 0:13:39.040 --> 0:13:41.880 know he's going to add tariffs on China. But sort 0:13:41.880 --> 0:13:44.440 of the order of it and the magnitude of course 0:13:44.480 --> 0:13:46.640 matters as well. So what's kind of your assumption for that, 0:13:46.679 --> 0:13:49.439 what countries will get hit first, and how long maybe 0:13:49.440 --> 0:13:51.199 will we wait for other countries to get hit? 0:13:52.040 --> 0:13:55.040 Yeah, I think if we follow you know what Trump 0:13:55.160 --> 0:13:59.640 is saying on his social accounts, China, Mexico, and Canada 0:13:59.679 --> 0:14:02.120 seem to be in the front in terms of the 0:14:02.160 --> 0:14:06.560 firing line. So our assumption specifically within the Asia region 0:14:06.960 --> 0:14:10.560 is the China tariffs, you know, ramping it up to 0:14:10.640 --> 0:14:15.560 sixty percent, that gets implemented in the first quarter, in 0:14:15.600 --> 0:14:20.760 the first half of this year itself, and then essentially 0:14:21.080 --> 0:14:25.080 the gradual ramp up on the rest of the world 0:14:25.480 --> 0:14:28.920 takes place over the course of twenty twenty five. But 0:14:29.040 --> 0:14:33.040 some of these other countries that are in the cross 0:14:33.120 --> 0:14:36.440 firing line because of trade diversion, as you said, I 0:14:36.480 --> 0:14:38.760 think it's going to take a bit more time to 0:14:38.880 --> 0:14:42.560 conduct studies and analysis, so their tariffs it could take 0:14:42.600 --> 0:14:45.160 a bit more time to come through. Also, there is 0:14:45.240 --> 0:14:47.760 uncertainty all said and done. I mean to the extent 0:14:47.920 --> 0:14:51.600 that you know, Trump is using threats on other countries 0:14:51.640 --> 0:14:54.360 more as a negotiating ploy to get them to increase 0:14:54.400 --> 0:14:57.040 their defense spending or to get them to buy more 0:14:57.160 --> 0:15:00.880 US energy products. There could be specific cases is where 0:15:01.400 --> 0:15:04.440 you don't see actually the kind of tart of implementation 0:15:04.880 --> 0:15:07.920 that he's threatening on a few countries. So I think 0:15:07.920 --> 0:15:12.240 we're dealing with very elevated levels of uncertainty. But that said, 0:15:12.280 --> 0:15:16.080 I think the baseline objective that he has to be 0:15:16.120 --> 0:15:19.920 taken very seriously in our few. 0:15:19.840 --> 0:15:23.760 Asia Centric is produced by Bloomberg Intelligence, where more than 0:15:23.800 --> 0:15:27.880 five hundred experienced analysts and strategists work around the clock 0:15:27.920 --> 0:15:31.960 to bring you timely, world class research. Our coverage spans 0:15:32.000 --> 0:15:36.800 two hundred market indices, currencies, commodities, and industries, as well 0:15:36.840 --> 0:15:40.080 as over two thousand equities and credits. If you like 0:15:40.160 --> 0:15:44.000 what you hear, don't forget to subscribe and chairm So 0:15:44.480 --> 0:15:48.280 now you're the head economist for Nomura based in Singapore, 0:15:48.280 --> 0:15:51.480 and you look at across the Asia Pacific region if 0:15:51.520 --> 0:15:54.440 you had to sort of do a simplistic ranking, so 0:15:54.840 --> 0:15:58.280 obviously China's going to be the most impacted. I'm assuming 0:15:58.320 --> 0:16:01.760 that some of the other open economies that rely on 0:16:01.840 --> 0:16:04.440 exports are also going to be negatively impacted. But who 0:16:04.480 --> 0:16:07.320 are the relative winners? Can you sort of give us 0:16:07.440 --> 0:16:11.960 some ranking of which economies should do relatively well versus 0:16:12.160 --> 0:16:13.120 relatively badly? 0:16:14.000 --> 0:16:16.320 Yeah? Sure, so I think we need to think about 0:16:16.360 --> 0:16:19.120 this both in terms of like the near term impact, 0:16:19.480 --> 0:16:22.240 but also sort of the medium term impact. If you 0:16:22.280 --> 0:16:27.120 think about the near term impact, the higher tariffs, more uncertainty, 0:16:27.480 --> 0:16:31.200 weaker global demand, weaker exports, that's pretty negative for the 0:16:31.240 --> 0:16:36.479 open economies in the region. So the likes of South Korea, Singapore, 0:16:37.040 --> 0:16:40.760 you know, these will be impacted more negatively just because 0:16:40.840 --> 0:16:45.080 they are open economies. But from a more medium term perspective, 0:16:45.160 --> 0:16:48.800 I think there are two trends that are important. One 0:16:48.840 --> 0:16:55.000 is really the rise of DM industrial policies, so you know, 0:16:55.120 --> 0:16:59.920 us trying to get semiconductor supply chain back or trying 0:16:59.920 --> 0:17:03.800 to get the you know, EV supply chain back, and 0:17:03.920 --> 0:17:06.320 this is not just US obviously, you know you're seeing 0:17:06.560 --> 0:17:10.080 the rise of industrial policies even in Europe. And the 0:17:10.160 --> 0:17:15.040 second trend is really the rise of China in the 0:17:15.080 --> 0:17:19.159 manufacturing supply chain. And China has moved up the value 0:17:19.240 --> 0:17:22.159 chain and today is you know, a global leader in 0:17:22.280 --> 0:17:27.760 some of the high tech manufacturing likes of evs. So 0:17:28.000 --> 0:17:30.600 some of the countries like South Korea, I would say, 0:17:30.600 --> 0:17:33.560 in particular, I think the question is, you know, the 0:17:33.600 --> 0:17:38.600 business model, the growth model going forward, because you know, 0:17:38.720 --> 0:17:42.600 these are these sectors in which Korea has done exceedingly well, 0:17:42.680 --> 0:17:45.760 but there is now this threat coming through both from 0:17:45.960 --> 0:17:50.160 the US industrial policies but also the rise of China. 0:17:50.280 --> 0:17:55.639 In terms of the winners from this trade tensions, I 0:17:55.640 --> 0:17:58.600 think the countries which are receiving a lot more of 0:17:58.720 --> 0:18:04.800 funding from non China destinations and which are competing more 0:18:04.880 --> 0:18:07.840 in the low tech to mid tech manufacturing which is 0:18:07.880 --> 0:18:12.040 not at risk necessarily from US industrial policies, other ones 0:18:12.600 --> 0:18:16.560 that should be relative beneficiaries. Again, the winners, you know, 0:18:16.600 --> 0:18:20.000 from a near term will be countries that are more 0:18:20.040 --> 0:18:23.800 domestic demand driven, and again I would put India in 0:18:23.920 --> 0:18:28.840 that bucket. India is also a strategy counterweight to China, 0:18:28.960 --> 0:18:32.879 you know when it comes to US policies, and Malaysia, 0:18:33.240 --> 0:18:36.080 which we also think is actually seeing a lot of 0:18:36.119 --> 0:18:39.359 benefits from the shift in supply chains that are ongoing 0:18:39.440 --> 0:18:41.720 right now. So we think Indian Malaysia will be the 0:18:41.760 --> 0:18:44.000 two big winners this time around. 0:18:44.920 --> 0:18:48.160 We've talked about a lot of Southeast Asian countries here, 0:18:48.480 --> 0:18:53.040 and how do you think they'll react Because we'll probably 0:18:53.040 --> 0:18:57.199 have US tariffs on Chinese goods, will probably have China 0:18:57.400 --> 0:19:00.440 offsetting and re routing those exports. How would we to 0:19:00.480 --> 0:19:04.080 Southeast Asia, So what are the risks there and how 0:19:04.119 --> 0:19:05.880 do they kind of manage that relationship. 0:19:06.520 --> 0:19:09.520 Yeah, no, absolutely, as you said, you know, and I 0:19:09.560 --> 0:19:13.520 would say this trend of increased China exports to rest 0:19:13.560 --> 0:19:17.840 of Asia is a trend that has really accelerated post 0:19:17.880 --> 0:19:21.480 the pandemic because of the weakness in China's own demands. 0:19:21.520 --> 0:19:24.160 So Asia is definitely seeing a lot of the channel 0:19:24.200 --> 0:19:27.600 over capacity ongoing. And you know what's interesting is that 0:19:28.040 --> 0:19:31.919 this is actually visible across a range of product categories. 0:19:32.520 --> 0:19:35.560 So whether it's sort of the low cost products with 0:19:35.880 --> 0:19:41.399 you know, through the e commerce platforms, metals, chemicals, autos, 0:19:41.840 --> 0:19:45.240 even capital goods and intermediate products of course, you know, 0:19:45.280 --> 0:19:48.560 across countries. So this is actually across the board. And 0:19:49.000 --> 0:19:52.320 as you said, with the Trump tariffs, we are likely 0:19:52.400 --> 0:19:56.880 to see in our view, redirection of these exports into 0:19:56.960 --> 0:19:59.359 the rest of the region. So it does complicate actually 0:19:59.359 --> 0:20:02.800 the economic picture for these countries because there's a surge 0:20:02.840 --> 0:20:07.040 and imports, the trade imbalances are worsening. There's a negative 0:20:07.080 --> 0:20:12.119 impact on production factories, kpex is getting impacted, the semi 0:20:12.240 --> 0:20:16.480 sector is you know under pressure, profitabilities under pressure, and 0:20:16.880 --> 0:20:20.320 you know, job creation is becoming a challenge, So a 0:20:20.400 --> 0:20:25.600 whole host of challenges that these countries are facing. And 0:20:25.840 --> 0:20:28.240 in fact, you know, in response to this, we've also 0:20:28.560 --> 0:20:33.520 seen some change in how some of these Asian countries 0:20:33.600 --> 0:20:37.600 have responded to the threat of more imports from China. 0:20:37.880 --> 0:20:41.119 I would say, a more subtle form of a rise 0:20:41.320 --> 0:20:46.320 in Asian protectionism, in fact, in the form of things 0:20:46.440 --> 0:20:51.080 like increasing the vat on low cost products or banning 0:20:51.240 --> 0:20:55.080 some of the e commerce apps for instance Timu and 0:20:55.200 --> 0:20:59.640 Shean exactly. There have been also changes in the incentive 0:20:59.640 --> 0:21:02.840 struct which I think is important for these countries in 0:21:02.920 --> 0:21:07.120 terms of putting policies in place such that there is 0:21:07.400 --> 0:21:10.879 less reliance on imports and more reliance on local value 0:21:11.000 --> 0:21:14.840 edition that comes in because of these, you know, so 0:21:14.920 --> 0:21:19.159 more investment from China rather than imports from China. So 0:21:19.600 --> 0:21:21.800 all of this is going on, and as you said, 0:21:22.119 --> 0:21:25.119 with US status, this is going to be a bigger challenge. 0:21:25.200 --> 0:21:26.840 But the end, at the end of the day, you know, 0:21:26.920 --> 0:21:30.880 Asia and Southeast Asia in particular has to balance its 0:21:31.359 --> 0:21:35.119 relationship with China, both for geopolitical as well as an 0:21:35.119 --> 0:21:39.960 economic reason. I mean economically, China and Southeast Asia have 0:21:40.040 --> 0:21:43.919 a very strong investment and trade relationship. A lot of 0:21:43.960 --> 0:21:48.879 the investment in infrastructure factories today in Southeast Asia is 0:21:48.920 --> 0:21:52.880 coming from China. And you know, as we were discussing, 0:21:52.960 --> 0:21:56.359 China is extremely important in the supply chains. So if 0:21:56.400 --> 0:21:59.040 you want to benefit from the supply chain shifts, your 0:21:59.080 --> 0:22:04.280 intermediate products are still coming from China. And I mean geopolitically, 0:22:04.359 --> 0:22:06.920 I think the you know, question really for countries is 0:22:07.640 --> 0:22:12.680 how reliable will US be as a defender of regional security? 0:22:12.880 --> 0:22:16.200 And there are question marks on this and so all 0:22:16.280 --> 0:22:19.440 said and done, I think for Asia and for Southeast Asia, 0:22:19.520 --> 0:22:22.679 it's all about you know, balance and you know, managing 0:22:23.080 --> 0:22:27.200 both US and China, which is you know, not easy. 0:22:27.880 --> 0:22:31.520 It must squeezed between two of the world's largest economies. 0:22:31.640 --> 0:22:33.879 There must be a real hard balancing act because like 0:22:33.920 --> 0:22:36.880 you look at something like electric vehicles are evs. Now, 0:22:36.920 --> 0:22:39.800 there's a flood of EV's going into Southeast Asia. I 0:22:39.880 --> 0:22:42.080 know you're based in Singapore, I know that there's a 0:22:42.080 --> 0:22:44.840 lot more Chinese EV's on the road there. But you 0:22:44.960 --> 0:22:47.440 have a place like Thailand. They've got a big car 0:22:47.480 --> 0:22:50.959 manufacturing industry and you're seeing they're being impacted by these 0:22:51.040 --> 0:22:52.879 Chinese imports. 0:22:52.720 --> 0:22:56.680 Absolutely, And in fact, you know, Japanese firms were actually 0:22:56.720 --> 0:23:00.800 the first ones to invest in Thailand in the plans, etc. 0:23:01.080 --> 0:23:04.359 And we've seen a couple of Japanese auto plants actually 0:23:04.359 --> 0:23:08.440 shut down because of the rise in the ev were 0:23:08.480 --> 0:23:13.439 seeing from China. It's tricky and in my view, a 0:23:13.480 --> 0:23:16.800 lot of these countries in Asia still I would say 0:23:16.800 --> 0:23:21.920 developing countries, right, I mean, they need to create jobs, 0:23:21.960 --> 0:23:24.800 they need to create growth. They're not at that stage 0:23:24.840 --> 0:23:28.400 of economic development where they can directly compete on high 0:23:28.520 --> 0:23:33.320 end semiconductor. Therefore, it's important for them to put policies 0:23:33.359 --> 0:23:39.199 in place such that there is more domestic value addition 0:23:39.320 --> 0:23:43.800 that comes in that for whichever product category that they're 0:23:43.840 --> 0:23:48.280 focusing on, that they create an ecosystem in place. And 0:23:48.359 --> 0:23:51.199 this requires different kinds of reforms. I mean some of 0:23:51.240 --> 0:23:55.800 the you know, basic stuff in terms of better infrastructure, 0:23:55.880 --> 0:23:59.320 better ease of doing business is where you start off with. 0:24:00.240 --> 0:24:02.400 But over a period of time, you know, you need 0:24:02.440 --> 0:24:06.240 to invest in innovation, in R and D and education skilling, 0:24:06.480 --> 0:24:10.080 so a lot of work homework actually that these governments 0:24:10.119 --> 0:24:12.719 also need to do to ensure they have a more 0:24:12.760 --> 0:24:14.320 sustainable growth over time. 0:24:15.640 --> 0:24:18.879 So now I love to bring the conversation to India. Now, 0:24:19.320 --> 0:24:23.159 India has been the one shining light, one shining you know, 0:24:23.240 --> 0:24:26.280 great economy over the last few years. Obviously China has 0:24:26.280 --> 0:24:29.280 been weeks, a lot of investors have been focusing on India. 0:24:29.840 --> 0:24:35.320 But recently we noticed that the authorities downgraded their economic forecast. 0:24:35.400 --> 0:24:39.040 Now we used to like eight percent GDP growth handle 0:24:39.400 --> 0:24:42.840 for India. Now it looks like it's been downgraded closer 0:24:42.880 --> 0:24:45.720