The 'sleeper issue' at the heart of Trump's trade war

How his govt decides the origin of goods could blow up laboriously negotiated deals

- Alexandra Stevenson

US President Donald Trump and Malaysian Prime Minister Anwar Ibrahim signing trade deal documents on Oct 26 during the 47th Asean Summit, In Kuala Lumpur, at the start of his nearly week-long trip to Asia, Mr Trump announced trade agreements with several South-east Asian countries.

(PHOTO: REUTERS)

For months, companies and officials throughout Asia have been waiting for US President Donald Trump to address a question that cuts to the heart of his disruptive plans for global trade.

How will he decide the origin of goods in a world where virtually all the things people buy, from computers and phones to sofas and cars, contain parts that come from different countries?

The answer is central to Mr Trump’s aim to reduce China’s dominant role as the starting point for many of the world’s manufactured goods.

“It’s a sleeper issue,” said Ms Wendy Cutler, a senior vice-president at Asia Society Policy Institute, a think-tank. “People are trying to convince themselves that it is just technical, but if you take a step back, it’s all going to rest on this.”

No other region is more exposed to Mr Trump’s crackdown than Southeast Asia. Billions of dollars a year in raw materials, machinery and finished goods flow from China through Vietnam, Thailand, Malaysia and other countries across the region.

In Kuala Lumpur, Malaysia, on Oct 26, at the start of his nearly week-long trip to Asia, Mr Trump announced trade agreements with several Southeast Asian countries.

The documents, to varying degrees, acknowledged pass-through trade and tariff evasion, but the announcements did not contain details addressing how he wants to define the nationality of goods.