Trade war’s bark turns to bite in Asia | 2018-11-05

Trade war’s bark turns to bite in Asia

5 November, 2018 12:00 AM printer

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 in October as gloom deepens over the trade outlook.  China’s official Purchasing Managers’ Index (PMI), which measures factory activity, came in at 50.2 in October, down from 50.8 the previous month, the latest sign of weakness in the world’s second-largest economy amid the trade war and a domestic debt problem, reports AFP.

But 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 in October, according to indices compiled by Nikkei/IHS Markit.

Taiwan saw its steepest falls in production and new business in just over three years, purchasing activity by companies fell for the first time since May 2016, and firms 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 Sun Ming-te of the Taiwan Institute of Economic Research.

South Korea’s PMI slipped to 51.0 in October 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, absorbing a quarter of Korean exports.

“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 firms and a slowing global economy that reduces demand for our exports,” said c, an analyst at the Korea Institute of Finance.

Southeast Asian manufacturers were feeling the effects too, with PMI in Malaysia and Thailand slipping below the 50-point level, which indicates contraction in the sector.

It was Malaysia’s lowest PMI since July and Thailand’s lowest in two years.

In an AFP interview last week, Malaysian Prime Minister Mahathir Mohamad complained that US President Donald Trump — who has accused various trading partners of “ripping off” America — “seems to be withdrawing from all commitments overseas”.


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