Deborah Elms, Head of Trade Policy at the Hinrich Foundation, spoke to CGTN Europe about the impact of tariffs on the global supply chain. The discussion highlights the global economic effects of U.S. tariffs, with a particular focus on developing countries and regional trade agreements such as RCEP and CPTPP.
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00:00Well, Deborah Elms is the head of policy at the Heinrich Foundation.
00:06I would say the United States, and particularly the U.S. consumer, is about to be hit quite hard
00:11from all of these tariffs against the rest of the world that are now going to affect U.S. consumers
00:16and U.S. businesses. But the damage will not be just in the United States. The damage, I think,
00:21is going to flow to especially a lot of developing countries that have very high tariffs imposed.
00:25And given the complete collapse in trade or trade in goods between the U.S. and China,
00:31I think there will be fallout in both markets as a result of this escalating tariff war that we're in.
00:39Can regional trade agreements such as RCEP, which involves 15 Asia-Pacific countries,
00:44help cushion the blow of tariffs?
00:46I think more than ever, as long as the members in groupings like RCEP agree or at least maintain
00:54openness to one another, the challenge will be if the response to U.S. activity is that others
01:00close markets to non-U.S. markets. In other words, potentially inter-regional or inter-Asian trade
01:07gets shut down as well. That will become an even bigger problem. But I think what helps avoid that
01:13challenge is things like an RCEP or the counterpart CPTPP, Comprehensive and Progressive Trans-Pacific
01:20Partnership, that is 12 countries that are also linked by a trade agreement. Those are the kinds
01:25of things that you're going to be looking to now for some lowering of risk and increase in
01:30certainty about trade rules.
01:32And of course, while the fight and the tit-for-tat is very much between China and the USA,
01:37because they're the world's two biggest economies, we are seeing other Southeast Asian nations
01:41hit by heavy duties. Cambodia, 49 percent. Vietnam, 46. Indonesia, 32. Does this effectively nullify
01:50the China plus one strategy, which was aimed at diversifying supply chains beyond China?
01:57Yes and no. I mean, if you diversified solely to access the U.S. market, then you could potentially
02:03be in trouble now because 46 percent on Vietnam makes those products often uncompetitive, but not
02:10always. So I think that is a challenge. But much of the diversification in the China plus one strategy
02:15was also about having products ready for the rest of the world. The rest of the world at the moment
02:21remains open and also for reducing reliance on any single market. So even Chinese firms diversified to
02:29lower the risks of challenges domestically that would cripple a firm. And so I think it's not the
02:35end of China plus one. It's not the end of supply chains or trade. It's just that we are we are rapidly
02:40changing supply chain footprints and final markets in ways that maybe we would never have imagined we
02:48would be thinking if it was just a few months ago. Do you see these tariffs as short-term shocks
02:53or could they herald a fundamental change in economic thinking around globalization?
03:00I would like to say short-term, but the experience with imposing tariffs is that they tend to be very
03:06sticky. And sometimes you end up, as an example, in the United States, there were tariffs imposed in
03:12World War II that are still in place. So decades or even potentially a century later, you may still be
03:19grappling with tariffs that were imposed. So I think we may find that many of the tariffs imposed in April
03:25of 2025 end up sticking around for far longer than any of us imagined.