Mar 22, 2025

I recently listened to a podcast featuring a former trade minister discussing the future of trade agreements like CPTPP and RCEP, as well as ASEAN geoeconomics and China Plus One strategies. The conversation highlighted the intersection of national security and geoeconomics in Southeast Asia, emphasizing the need to balance security concerns with competitiveness in industries like electric vehicles. The role of government policies in maximizing benefits from industrial policies and the energy transition was also addressed.

The podcast explored how countries like Vietnam are leveraging smart policies to attract foreign investment and develop local ecosystems in industries like semiconductors. It also discussed the challenges and opportunities presented by China’s dominance in sectors like electric vehicles in the Southeast Asian market. The importance of maintaining a balance between importing goods and developing local industrial bases to avoid overreliance on a single player was emphasized.

Furthermore, the podcast touched on the need for countries in the Indo-Pacific to consider their comparative advantages and develop comprehensive industrial policies beyond financial subsidies. It highlighted the opportunities for competition in the ASEAN market, the importance of strategic planning in developing local ecosystems, and the need to move up the value chain in industries like semiconductors. The conversation also raised questions about potential scenarios of China’s dominance in the Indo-Pacific and the varying perspectives on the challenge and opportunity it presents for regional economies.

Federal Reserve officials are facing increased uncertainty due to recent policy changes made by the new administration. The latest Summary of Economic Projections shows a spike in forecast uncertainty for growth, inflation, and joblessness, with a negative skew in the balance of risks for all three variables. Concerns about inflation stemming from higher input costs and hoarding are present, as well as worries about the impact on growth and employment as consumers and businesses adjust to policy changes.

In the stock market, valuations are showing signs of being stretched, with concerns about some stocks being overvalued. The relationship between earnings multiples and core inflation has become detached since the COVID pandemic, raising concerns about irrational exuberance. Additionally, the ratio of the S&P 500 to the money supply has reached its highest level since 2000, indicating potential market exuberance. These developments in the economy and financial markets highlight the challenges and uncertainties faced by policymakers and investors in navigating the current landscape of policy changes and market dynamics.

Stay Well!