THE IMPACT OF THE US-CHINA TRADE WAR ON ASEAN’S EXPORTS TO THE US

Abstract

In light of the US-China Trade War, this paper examines whether ASEAN experiences positive substitution effects through trade diversion or negative complementary effects due to the weakening global demand. With quarterly trade data from 2013-2019 and the identification of six distinct waves of US tariffs on China goods, I conduct a difference-in-differences strategy that investigates the effect of each tariff wave on the trade value of ASEAN’s exports to the US. My results show inconclusive evidence of any effect on ASEAN as a whole for all waves, except for waves 5 and 6 which display statistically significant but contrasting effects. There are heterogeneous effects at the country and sectoral level, namely key products involving machinery and electronics. Taking into account the export profiles of each ASEAN country, there appears to be strong substitution effects. However, my pre-trends analyses show that these effects have been occurring even before the trade war.