ASEAN, China to sign new free trade deal as US tariffs loom | East Asia Tonight (Jul 10)

Key Concepts

• US-China trade rivalry
• ASEAN unity and centrality
• US tariffs and their impact on Asian economies
• South Korea's economic policy and interest rates
• Defense cooperation between US, Japan, and South Korea
• Taiwan's defense capabilities
• China's railway technology and Belt and Road Initiative
• AI and its impact on energy demand and chip manufacturing
• Nuclear power as a sustainable energy source

ASEAN Foreign Minister's Meeting and US-China Rivalry

• Main Point: The ASEAN Foreign Minister's Meeting in Kuala Lumpur is a focal point for US and China to vie for influence amid an unpredictable economic landscape.
• Details:
  • China agreed to enhance its partnership with ASEAN through a new trade deal.
  • Malaysian Foreign Minister stated Beijing will sign a treaty for a weapons-free zone in Southeast Asia.
  • Malaysia also signed a civil nuclear cooperation memorandum of understanding with the US.
  • US tariffs cast a shadow over discussions, with eight ASEAN members receiving letters about potential higher tariff rates.
  • Russian Foreign Minister Sergey Lavrov, along with diplomats from India, the EU, and Japan, also participated in discussions.
• Melissa Go's Report:
  • Chinese Foreign Minister Wang Yi reassured ASEAN of China's support amid US tariffs.
  • US Secretary of State Marco Rubio met ASEAN counterparts and called on Malaysian Prime Minister Anwar Ibrahim, who promised to raise the tariff issue collectively with the US.
  • Rubio encouraged ASEAN to leverage US expertise in nuclear technology, power generation, digital and green economy, and AI.
  • Rubio emphasized the importance of ASEAN remaining open, free, and secure.
• ASEAN's Position: ASEAN countries are trying to avoid taking sides in the US-China rivalry.
• Trade Dynamics: China is ASEAN's largest trading partner, while the US is the biggest buyer and investor.
• South China Sea: ASEAN is doubling down on efforts to maintain peace and stability, pushing for the early conclusion of the code of conduct on the South China Sea.

US Tariffs and Economic Impact

• Impact on ASEAN: Almost all Southeast Asian countries are affected by high tariffs ranging from 20% to 40%, disrupting businesses, affecting growth, and impacting livelihoods.
• Adib Zalapi's Analysis:
  • Reciprocal tariffs affect all countries negatively due to interconnected trade in Southeast Asia.
  • ASEAN is united in opposing the principle of reciprocal tariffs.
  • The Vietnam deal shows that even with concessions, tariffs remain relatively high (20%).
  • ASEAN has an opportunity to show its value by speeding up integration and trading more with each other.
  • US commitment to the Asia-Pacific region is undermined by counterproductive tariffs.
  • China's strategy is to ignore further tariff escalation and crack down on illegal transshipment.
  • China is prioritizing ASEAN in its diplomacy, sending positive messages through measures like nuclear weapon-free zone support and visa-free travel.

South Korea's Economic Policy

• Bank of Korea (BOK) Policy: The BOK kept its benchmark rate unchanged due to surging household debt and rising housing prices.
• Balancing Act: The central bank is balancing shielding South Korea's trade-reliant economy from US tariffs and maintaining financial stability.
• Rate Cut Stance: The BOK emphasized its commitment to a rate-cutting stance to support economic growth.
• Internal Debate: Most board members favored a rate cut in the next 3 months, but some wanted more time to ensure financial stability.
• Economic Context: The BOK has already lowered its benchmark rate twice this year after GDP shrank unexpectedly in the first quarter.
• Tariff Threat: South Korea faces the threat of a 25% reciprocal tariff from the US starting August 1st.
• Export Dependence: Exports account for more than 40% of South Korea's GDP.
• Analyst Expectations: Analysts expect at least one more rate cut this year.

Defense Cooperation: US, Japan, and South Korea

• Trilateral Meeting: Military chiefs from the US, Japan, and South Korea are set for a meeting to boost military cooperation.
• Bilateral Talks: Bilateral meetings between South Korea and the US, and South Korea and Japan, were held in Seoul.
• Focus: Discussions focused on regional and Korean peninsula security issues and ways to strengthen military cooperation.
• US Pressure: The US is putting pressure on its allies to increase defense spending to 5% of their GDP.
• Cost Sharing: South Korea has stated it will follow previously agreed terms on defense cost sharing.
• Previous Deal: A five-year deal was reached before the US presidential election, with South Korea increasing its contribution by 8.3% to $1.47 billion in the first year.
• Potential US Troop Reduction: Talks are seen as an opportunity for both sides to understand each other's position on potential US troop reduction.
• North Korea: South Korea and Japan likely focused on sharing information related to North Korea's nuclear weapons and missile program.
• Freedom Edge Drills: The three countries are expected to discuss Freedom Edge drills, potentially held in September, to improve coordination in response to threats like missile attacks, cyber attacks, or naval conflicts.
• EJong Administration's Policy: The US and Japan are seeking to understand President EJong's policy on North Korea, which emphasizes dialogue and engagement.

Taiwan's Defense and Military Drills

• Han Kuang Drills: Taiwan showcased its new US-made Abrams tanks at the annual Han Kuang military drills.
• US Tanks: The Abrams tanks are among the first 38 delivered in December, with 70 more due in batches over the next year.
• President William Li's Statement: The Indo-Pacific region will be more peaceful and stable once Taiwan's safety is secured.
• Purpose of Drills: The drills are intended to show Taiwan's determination to defend itself against any Chinese attack or invasion.
• Civil Defense: Civil defense is a key focus, with evacuation exercises conducted at local supermarkets.

Business and Technology News

• Japanese Automakers: Japanese automakers are reportedly slashing prices of exports to the US to stay competitive after being hit with 25% tariffs.
• China's Vehicle Sales: China's new vehicle sales grew 11.4% driven by exports and demand for electric vehicles.
• TSMC's Revenue: TSMC reported better-than-expected revenue in the second quarter due to surging interest in AI applications.
• AI Spending Boom: TSMC's robust revenue is helping to lift expectations of an AI spending boom.
• Nuclear Power Renaissance: The rise of AI and its demand for processing power is driving a resurgence of nuclear power as a sustainable energy source.
• Samsung's Foldable Phones: Samsung unveiled thinner, lighter foldable phones to fend off Chinese competitors.
• Stable Coin Risks in China: A Chinese industry body warned investors to be vigilant against illegal fundraising risks involving stable coins.

China's Railway Technology

• Railway Exhibition: A railway exhibition in Beijing showcased China's cutting-edge developments.
• CR450 Bullet Train: A model of the CR450, a prototype bullet train, was unveiled, capable of reaching test speeds of 450 km/h.
• Train Simulator: A train simulator allowed attendees to virtually operate a train reaching speeds of up to 350 km/h.
• High-Speed Rail Network: China has the fastest-growing high-speed rail network in the world.
• Belt and Road Initiative: China is leveraging its expertise to expand connectivity with other countries and push its Belt and Road Initiative forward.

Other News

• Yemen: A Chinese envoy called on Houthis in Yemen to stop attacking commercial vessels in the Red Sea.
• Ukraine: Ukraine detained two Chinese nationals on suspicion of spying on its missile program.
• South Korea: South Korea's ousted leader, Yungu, has been summoned for questioning over his failed martial law bid.
• Flooding in China: China is grappling with widespread flooding due to torrential rains.
• Heat Wave in South Korea: Power demand in South Korea could hit a new record this summer due to a scorching heat wave.
• Mars Soil Simulant: Chinese geologists created a Mars soil simulant for future explorations.
• Lunar Exploration: Chinese scientists shed light on the evolutionary history of the moon using samples from the Chong 6 mission.

Conclusion

The news program covers a range of critical issues in East Asia, including the complex interplay of trade, defense, and technology. The US-China rivalry is a recurring theme, impacting ASEAN's unity and economic stability. South Korea grapples with balancing economic growth and financial stability, while Taiwan focuses on bolstering its defense capabilities. China continues to advance its technological prowess, particularly in railway technology and AI, while also facing challenges such as flooding and scrutiny over its international relations. The program highlights the interconnectedness of the region and the importance of navigating these complex dynamics.