Trump's tariff tango

Insight: It seems like every morning we wake up to new updates to President Donald Trump’s tariff policies targeting China, Mexico, Canada and, increasingly, the rest of the world. On February 4, the White House eliminated a “de minimis” tax exemption on low-value parcels from China and Hong Kong, while imposing 10% tariffs on all Chinese imports. As well as 25% global tariffs on steel and aluminum imports, to which China was already subject. In retaliation, China implemented a 15% border tax on US coal and liquefied natural gas and a 10% tariff on American crude oil, agricultural machinery, and large-engine cars. 

Impact: The ongoing developments in President Trump's tariff policies represent a significant escalation in the trade tensions between the world’s two largest economies. Building upon tariffs from his first term, these measures could lead to a “lose-lose” situation for both the US and China, with American consumers likely bearing the brunt of higher prices as a result. Trump's aggressive tariffs, alongside the looming threat of a TikTok ban in the US, can be interpreted as strategic bargaining tactics. In the broader context of the fight for technological dominance and global influence, this trade war between the US and China will significantly shape the geopolitical landscape, with lasting implications for the global economic order – and a potentially significant impact on other Asian nations. 

$77 billion

In a clear sign of geopolitical shifts, Japanese foreign direct investment into the US hit a record of almost JPY12 trillion (USD77 billion) last year, while Japan’s FDI into China was flat at just under JPY500 billion – a much lower level and down 60% compared to a decade ago.

Insight: Time to update that iconic tune from the musical South Pacific? The Indonesian government is planning to develop a USD1 billion ‘premium health care’ complex of hospitals, sanatoria, and, of course, beaches in Bali. Designated as a special economic zone, ‘The Sanur’ complex will feature lush surroundings and a 2km-long stretch of coastline as well as tax breaks for the foreign investors and partners the scheme hopes to attract. 

Impact: Combining a tropical setting with reasonable prices should allow Indonesia to attract the growing number of medical tourists from developing countries – many of which currently travel to Thailand for everything from checkups to major procedures. A second goal is to keep at home some of the 1m Indonesians who annually travel overseas for medical services. While The Sanur is currently facing teething troubles due to high costs and a shortage of doctors, developing sophisticated healthcare facilities looks like a smart economic diversification for Jakarta. And a strategy that Hong Kong, Japan, and other Asian countries should consider emulating. 

Insight: China is set to launch a network of "silver trains" specifically designed for elderly tourists, aiming to capitalize on the country's rapidly aging population and boost its "silver economy." These trains will feature modified seats and bathrooms for improved comfort and accessibility, on-board medical and senior-friendly amenities, and tailored entertainment options such as karaoke lounges and chess areas. This initiative, announced by several Chinese government agencies including the Ministry of Culture and Tourism and China State Railway Group, is planned to be fully operational by 2027. 

Impact: According to World Bank population estimates, more than 20% of China’s population in over 60, so the “silver trains” initiative is a novel approach to harness the considerable spending power of this growing demographic. In a world where the tastes of Millennials and Gen Z are studied and prioritized, China is taking a different route by focusing on the needs of its aging population to boost travel and consumption. Transforming demographic challenges into economic opportunities is a strategy worth copying - other countries with an aging population should take note. 

Insight: With tariffs on pretty much everyone’s mind – including our lead item for this edition – we would like to highlight this opinion piece from Janan Ganesh, one of the smartest commentators at the Financial Times. 

Impact: The article argues that the US could not have ‘managed’ or prevented the economic and hence geopolitical rise of China over the past several decades. The theory, increasingly advanced in Washington these days, that naive US administrations in the 1980s and 1990s opened global trade up to China and hence sealed their own country’s relative decline doesn’t match the facts. Once China started making sensible policy choices under Deng Xiaoping, its scale made the end of American unipolarity inevitable. It follows that a new trade policy, based on tariffs and protectionism, will not reverse today’s reality. But it will have negative consequences on America.

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