This study examines the impact of bilateral trade with the United States on exchange rate volatility in ASEAN economies. Using a pooled mean group (PMG) estimator, the results indicate that bilateral trade significantly increases exchange rate volatility, suggesting greater exposure to external shocks. By incorporating tariffs and the Regional Comprehensive Economic Partnership (RCEP) as moderating factors, the findings show that tariffs weaken the positive relationship between bilateral trade and exchange rate volatility, whereas RCEP strengthens this relationship. These results imply that deeper trade integration with the United States may heighten exchange rate sensitivity in ASEAN economies, particularly under RCEP integration. Tariffs appear to act as structural friction, dampening the impact of bilateral trade on exchange rate volatility.
Wahab et al. (Sun,) studied this question.