Asia Manufacturing Affected by Trade War

Manufacturing activities in major Asian countries were affected by trade war, according to data. Read more here!

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Manufacturing activity in top Asian economies took a blow from weak export orders last August. This has been considered as a sign that it’s starting to feel a hit from intensifying trade friction between the United States and China that most fear could dampen global economic growth.

Surveys of buying managers released on Monday showed persistent pressure on major exporting locations China, South Korea, and Japan.

In China, its huge manufacturing sector grew at the slowest pace in over a year in August, with export orders sinking for a fifth month.

Exports orders also slipped in Japan and South Korea, indicating that increasing protectionism and concerns of slower Chinese demand are dragging on Asia’s export-reliant economies.

In a separate data, Japanese corporate capital expenditure increased during the second-quarter by the most since 2006, although some analysts cautioned that global trade tensions may cloud the outlook.

“The tit-for-tat retaliation hurts China’s economy far more than that of the United States. And when you look at Asia’s economic prospects, much depends on whether China could avoid a sharps slowdown in growth,” stated Yoshiki Shinke, the chief economist at Dai-chi Life Research Institute in Japan.

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US President Donald Trump’s “America First” trade push has already damaged confidence in many countries and dampened Asian stocks, as investors fret about the hit to global supply chains.

Most market participants are afraid that the escalating tariff trade conflict will freeze business investment and trade in a hit to global growth.

Trump has stated that he is ready to impose new tariffs as soon as a public comment period on the plan finished on Thursday. That would be a major escalation after Washington already slapped tariffs on $50 billion of exports from China.

Meanwhile, in Germany, there are signs the global trade tensions are having a more obvious impact with industrial order figures for July expected to show only a small rise, following its fall by the most in nearly a year-and-a-half in June.

Even if the US economy still treads with solid footing due in part to huge tax cuts by the Trump administration, a number of analysts say that growth has now peaked.

A survey last month forecast growth in the world’s biggest economy will slow steadily in the coming quarters, with analysts expecting Trump’s trade war to cause some damage.

Another survey showed a similarly careful outlook for euro zone growth over the remainder of this year as well as in 2019.

China’s Caixin/Markit Manufacturing Purchasing Managers Index (PMI) dropped to 50.6 in August from July’s 50.8, matching economists’ forecasts. Even though the index remained higher than the 50-point mark that separates growth from contraction for the 15th month in a row, it was still the weakest since June 2017.

New export orders, which are an indicator of future activity, have contracted for the longest stretch since the first half of 2016, according to Caixin PMI.

“The manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable,” Zhengsheng Zhong, who is the director of Macroeconomic Analysis at CEBM Group, stated in a note. “China’s economy is now facing relatively obvious downward pressure.”

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