Impact of US-China Trade Policy Uncertainty on Selected ASEAN Countries Trade Balance

Lean, Jie Lin (2025) Impact of US-China Trade Policy Uncertainty on Selected ASEAN Countries Trade Balance. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study investigates the impact of United States trade policy uncertainty (TPU) and key macroeconomic determinants on the trade performance of selected ASEAN economies. Focusing on Malaysia, Indonesia, Thailand, and the Philippines (ASEAN-4), the analysis examines both export flows to the US and import flows from the US during the period 2000–2023. A panel Autoregressive Distributed Lag (ARDL) framework is employed to capture both the short-run dynamics and long-run relationships between trade flows and their determinants. The empirical models specify exports of ASEAN-4 as a function of US real GDP, the real effective exchange rate (REER), and US TPU, while imports are modeled as a function of domestic real GDP, REER, and US TPU. The findings indicate that US real GDP exerts a strong positive influence on ASEAN-4 exports, underscoring the region’s dependence on external demand. In contrast, domestic real GDP is positively associated with imports, reflecting the import-intensive nature of production and consumption in ASEAN-4 economies. Exchange rate movements demonstrate mixed effects, with REER appreciations dampening export competitiveness but simultaneously lowering import costs. Notably, US TPU exhibits significant impacts on both exports and imports, highlighting the vulnerability of ASEAN-4 to external trade policy shocks. This study extends the literature by explicitly examining the role of US trade policy uncertainty (TPU) in addition to traditional macroeconomic determinants. By incorporating TPU into the export and import functions of ASEAN-4, the research highlights how external policy shocks interact with real GDP and exchange rate dynamics to influence bilateral trade with the US