- Nomura strategists analysed all 7,705 items subject to tariffs in the US-China trade war.
- Their results show Malaysia is the best-placed Asian country to benefit if the two superpowers look elsewhere to source goods.
- Longer-term, they found Vietnam has the strongest appeal as a production base if a protracted trade war forces industries out of China.
US-China trade tensions are keeping markets on edge, following some mixed messages in recent days.
Last week, there were reports Chinese Vice Premier Liu He plans to fly to the US for trade negotiations ahead of the G20 summit later this month.
But that was followed by a regional standoff between the two superpowers at a fiery APEC conference over the weekend.
If events escalate, Nomura reckons Malaysia, Japan and Pakistan are in the box seat to pick up the short-term slack on imported products.
In the event of a protracted trade war, China’s established manufacturing industries may come under threat.
If that happens, Nomura said Vietnam tops the list of countries that could benefit from production relocation away from China.
Here’s a summary of the analysis:
To reach their conclusion, the analysts conducted some “granular” research.
And by granular, what they mean is detailed analysis of all 7,705 products subject to tariffs from both sides.
Their research showed the US list affects 3,477 products imported from China, with a combined value of $US270 billion.
Product categories are concentrated in electrical equipment, appliances and components (29%), machinery and mechanical appliances (22.7%) and furniture and related products (11.9%), they said.
China’s tariff list covers 4,228 US products with a combined value of $US110 billion, and is concentrated in food, beverage and tobacco, and plus vehicles.
In assessing which other trading partners would benefit the most from a trade war, Nomura took a two-tiered approach based on short-term and long-term time frames.
Short-term, both countries would have to look elsewhere to source products. So the analysts established an Import Substitution Index (NISI), based on factor including relative production specialisation and geographical proximity.
Over the longer term, some Chinese industries may face a competitive disadvantage from the US tariffs.
Nomura measured the countries best-placed to benefit with reference to the Production Relocation Index (NPRI), based on parameters including export similarity and foreign direct investment attractiveness.
“At the broad macro level, Asia is set to lose out,” Nomura concluded.
However, “we believe that there are likely to be some companies, industries and possibly even small economies that benefit from a US-Sino trade war”.
This table lists specific companies that are based in the best-placed import substitution countries that Nomura think could benefit from US-China trade tensions: