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| CME: Trump Questionable Numbers and the Trade War Ahead. |
Thursday, 3 April 2024: The so-called liberation day arrived and Trump announced his reciprocal tariffs to the entire world, inaugurating a new era of global trade war. The Center for Market Education (CME) would like to first bring attention to the table presented by President Trump in which the new tariffs were compared with what the US administration showed as the level of protection practiced by other countries against the United States of America (USA); according to the American administration, these figures include trade barriers and currency manipulation.
At first sight, these numbers looked incredibly high, making the reader think that maybe the USA have at least a part of reason in trying to protect themselves from what looks like a trade war fought by the rest of the world against America. However, CME tried to understand how those figures came about and the result was shocking. If we look at Trump’s table with reference to some selected Asian countries, the USA have to deal with 47% trade barriers from Malaysia, 64% from Indonesia, 67% from China, 46% from Japan and 90% from Vietnam. Again, if these numbers were true, we could assume that an attempt of protection would be justifiable. Unfortunately, however, these numbers have no scientific logic and they are the result of the ratio between US trade deficit and US import with each country.
Table: Ratio between US Trade Deficit and US Import with selected Asian countries.
Source: CME calculations on data from World Population in Review (https://worldpopulationreview.com/country-rankings/us-trade-deficit-by-country).
It iIt goes without saying, trade barriers cannot be calculated as the ratio between trade deficit and import: while trade deficit, import and export are influenced by trade barriers, they are not uniquely determined by them. A scientific approach to trade barriers (tariff and non-tariff barriers) is instead the one presented by the Tholos Foundation with the International Trade Barrier Index (https://www.tradebarrierindex.org/): the new edition will be launched by CME and Tholos in Jakarta on 6 May (https://marketedu.me/innovation-summit-2025/).
It is then clear that the trade war begins in the worst possible way: made-up data. However, if an angry and anti-trade reaction seems justified, it will not be the right answer. “Those eras characterized by free international trade have proven to be able to bring benefits for consumers in terms of innovation and greater availability of products at cheaper prices”, said Dr Carmelo Ferlito, CME CEO.
“Those countries who are seriously opposed to Trump’s trade approach should react by pushing even more for bilateral and multilateral free trade agreements; free trade agreements which must be inspired by the belief in the overall benefits of free trade and not by the attempt to create even more hidden protection for domestic industries”, added Dr Ferlito, who is also a Faculty Member at Universitas Prasetiya Mulya and an Adjunct Professor at Taylor’s University.
Malaysia privileged position within ASEAN should be an occasion to push in two directions:
A higher degree of service trade liberalization, which could include labour movements;
Pushing for a more aggressive trade policy with the European Union, trying to convince the EU that its non-tariff barriers are not different from American protectionism.
About CME: The Center for Market Education (CME) is a think-firm with offices in Kuala Lumpur, Malaysia, and Jakarta, Indonesia. Blending the enthusiasm and the research orientation of a think-tank with the professionalism of a consulting firm, CME specializes in business advisory, economic and policy analysis, and training services.
CME assists international businesses willing to step into Southeast Asia with services of market intelligence, business model advisory and legal and institutional support.
CME also provides services of policy analysis and policy advocacy, aiming at supporting the creation of a more business-friendly and innovation-led institutional ecosystem, supported by free-trade regulations.
Finally, CME supplies customized events and training services for academicians, business people and diplomats, developing economics modules tailored according to the audience.
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