Trade spat starting to hit Asian economies, Latest Business News - The New Paper
Business

Trade spat starting to hit Asian economies

This article is more than 12 months old

Manufacturing gauges across Asia weakened last month

SHANGHAI The US-China tariff slugfest has for months triggered warnings that it could impact global economic growth, and recent data indicates the trade tension is indeed beginning to bite.

Manufacturing gauges in several export-reliant Asian countries, as well as China, weakened last month as gloom deepens over the trade outlook.

China's official Purchasing Managers' Index (PMI), which measures factory activity, came in at 50.2 last month, down from 50.8 the previous month.

China's troubles are bad for the rest of the region, and the world, analysts said.

Asian exporting countries from South Korea to Malaysia saw PMI decreases last month, according to indices compiled by Nikkei/IHS Markit.

Taiwan saw its steepest falls in production and new business in three years, purchasing activity by companies fell for the first time since May 2016, and businesses anticipate lower factory output in the next 12 months, Nikkei/IHS Markit said.

"Taiwan is feeling the effects of this trade war because China is the factory for many companies in Taiwan. When the estuary is blocked, you feel the effects," said Mr Sun Ming-te of the Taiwan Institute of Economic Research.

South Korea's PMI slipped to 51 in last from 51.3 in September, while a separate Korean business sentiment index for manufacturing sank to its lowest level in two years.

China is South Korea's largest trading partner.

"The situation may get worse next year due to a prolonged trade war between the US and China, growing default risks at debt-plagued Chinese companies and a slowing global economy that reduces demand for our exports," said an analyst at the Korea Institute of Finance.

South-east Asian manufacturers were feeling the effects too, with PMI in Malaysia and Thailand slipping below the 50-point level, which indicates contraction. It was Malaysia's lowest PMI since July and Thailand's lowest in two years.

Last week, Malaysian Prime Minister Mahathir Mohamad said US President Donald Trump "seems to be withdrawing from all commitments overseas".

He said that hurts everyone, including the US.

But not everyone feels the shock yet, with Japan's manufacturing looking solid last month.

Mr Trump, meanwhile, faces little pressure to tame his trade rhetoric at home, with a rosy US outlook marked by rising wages and low unemployment.

And even in Asia, there will be some winners as conflict re-aligns trading patterns, economists noted.

Vietnam, in particular, looks to gain as foreign manufacturers relocate out of China to escape the trade war crossfire and what many say is an increasingly unfair playing field for foreign companies in China.

Vietnam PMI climbed from a ten-month low of 51.5 in September to 53.9 last month.- AFP

WORLD