President-elect Trump has recently been in the news for his promise of imposing tariffs on trade, with a big 60 percent tariff that Trump promises to impose on all Chinese imports. In his first term, Trump applied a 25 percent tariff on Chinese products which prompted many companies to move their factories to the South East Asian countries.
This first wave of factory relocation brought about the need for cheap labor. It appears that this second wave of relocating will not bring the same cheap labor but instead will be reliant on technology and machines.
During the first round of tariffs, many companies left China to go to Malaysia, Thailand, and Vietnam. Although South East Asia may be able to gain from the relocation of these companies, Trump has stated that he is not a fan of the trade surplus that many countries have on the United States.
In 2022 the U.S. goods and services trade deficit with ASEAN was $199.9 billion in 2022. Trump has threatened similar trade restrictions and tariffs to countries that have higher trade deficits which include some South East Asian countries. Further Trump has set his eyes on Vietnam claiming that it is one of the worst so this could drive companies away from Vietnam for fear that Trump may have harsher trade punishments for Vietnam.
Even if the manufacturing is moving into the region there is still the issue of where the raw materials come from. Most of the raw materials that would be used for production would come from China. This means that with manufacturing moving to the region and raw materials coming from China local economies will struggle to keep up with Chinese imports to the countries.
What does this mean for local economies and employment in Southeast Asian countries where these factories are most likely to relocate? Even though there could be an initial benefit of having these factories come into the countries there is most likely to be a detriment in the long run. Not only could this bring competition and snuff out local economies and businesses it could also affect the amount of work there is for migrant workers who typically work factory jobs.
Migrant workers would typically benefit from these factories as that means more jobs. The pay already is not great in the region and with a limited number of these jobs there is fierce competition so this could mean more jobs for these types of migrant workers. That of course is there is not a shift to using more technology for manufacturing which instead would just mean fewer jobs for these migrant workers.
Additionally, a lot of these economies gain a lot from remittances and I wonder what the effects will be. Is there going to be an increase in the amount of migrant workers overseas coming back or will they decide to continue sending back money despite the increased costs?
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