USA withdraws from TPP, possible impacts on Asia gauged

According to Bloomberg, Donald Trump’s decision to withdraw from Trans-Pacific Partnership, which is one of the largest regional trade blocks ever, might have serious impacts on some economies in Asia. US had joined the negotiations for the deal in 2008; however, the process to finalize the agreement was prolonged until late 2015. Before it was approved in one of the participant countries, the decision to exit from the block has come from the US recently.

Seven countries in the bloc (Japan, Vietnam, Malaysia, Singapore, Australia, Brunei and New Zealand) had bilateral trade with the US worth $400 billion in 2015.

The report revealed that Vietnam, whose trade with America grew by five times from 1995 to 2015, is likely to feel the largest impact of the decision as this was expected to boost the country’s GDP by 11% by 2025.

Japan may also be affected as the country’s car and auto-part manufacturers were planning to enter the world’s largest export market, the USA, with lower tariffs. Singapore may also feel the damage as they were relying on improved exports to the US to help boot their sagging economy.

The new decision has reportedly brought the Regional Comprehensive Economic Partnership (RCEP), another Asian trade pact, to the fore. The pact, which aims to enhance trade ties among China, Japan, India, South Korea, Australia and New Zealand, covers 40% of the global trade. However, it is considered a lower quality trade deal when compared to TPP as its rules on intellectual property, labor and environmental standards are less strict, the report revealed.

Currently, three Asia-Pacific countries, Australia, Singapore and South Korea, have free trade agreements with the USA.