ASEAN-EU Trade relations strengthen amid Trump’s tax threats
Amid the looming threat of Trump-era tariffs, trade relations between ASEAN and the European Union (EU) have grown closer. On Sunday, Indonesian President Prabowo Subianto and European Commission President Ursula von der Leyen reached an agreement to move forward with the Comprehensive Economic Partnership Agreement (CEPA), which is expected to be completed by September.
"We want to see greater European engagement in our economy," Prabowo said in a joint press conference.
Under the deal, 80% of Indonesian exports to the EU will benefit from tariff elimination within 1-2 years after the agreement takes effect, according to the Indonesian government.
Indonesia anticipates that exports to the EU will increase by around 58% within three years of the agreement’s implementation, which could boost Indonesia's GDP by 0.19%.
Trade with the EU may help Indonesia mitigate the impact of Trump’s 32% tariff, as the US receives 11% of Indonesian exports and is the second-largest importer of Indonesian goods, following China. Meanwhile, the EU is Indonesia's fifth-largest export market, accounting for 7%.
The EU accounts for 9% of total ASEAN exports, making it the third-largest market for the 10-member bloc outside the region, behind China and the US.
Thailand, having completed the sixth round of trade talks with the EU at the end of June, plans to conclude negotiations by the end of this year.
“Amid geopolitical and global economic uncertainties, both Thailand and the EU have reaffirmed their commitment to being reliable and predictable trading partners,” said Pichai Naripthaphan, Thailand's Commerce Minister at that time.
The EU is Thailand’s fourth-largest trading partner, and trade talks between the two began in 2013 before stalling after the Thai military coup. Talks resumed in 2023.
Meanwhile, Malaysia announced in January that it would resume trade negotiations with the EU, with the first round held from late June to early July. Malaysia had suspended negotiations in 2015 due to disagreements over EU measures affecting palm oil producers.
The Philippines also plans to resume talks with the EU in October 2024, with a target to conclude the deal by 2027.
The EU is accelerating its diversification of trading partners and supply chains amid the US’s growing isolationism and ongoing economic security threats from China.
"We are in a turbulent period, and when economic uncertainty meets geopolitical volatility, allies like us must draw closer together," von der Leyen said in the joint press conference on Sunday.
ASEAN aims to become the world’s fourth-largest economy by 2030, and the EU has expressed its willingness to expand cooperation with Japan and other member states through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Source: Nikkei
