World Trade Can Slow Because of US-China Disagreements

Forex News

High-ranking American and Chinese officials are meeting in China this week. The issue of trade between countries should become the main one, as both sides threaten mutual tariffs on imports of hundreds of billions of dollars. The results of the meetings can be crucial for the forecast of Asian exporters, as the reviews of the purchasing managers index (PMI) concerning production activity already indicate a slowdown.

Analysts say that the momentum in world trade, which accounts for most of world growth, may show signs of slowing down in the coming years. Despite, business growth in the US and Europe stays strong, it has slowed to more modest levels with US manufacturers complaining about rising commodity prices in anticipation of trade tariffs.

China's Caixin/Markit PMI rose to 51.1 in April from a four-month low of 51.0 in March, and exceeded economists' forecast for a slowdown to 50.9. The report suggested continued strength in the domestic economy, where consumption was a major growth driver in the first quarter. The Japanese Markit/Nikkei PMI grew to 53.8 in April from 53.1 in the previous month. But growth in export orders slowed sharply to only marginal levels due to a stronger yen.

Factory activity in South Korea contracted for a second month in April, with both domestic and export orders shrinking. South Korean exports fell in April for the first time in 18 months. Economists said, domestic orders remained strong and a long spell of sharply higher input prices appears to be leveling off. This suggests many Asian central banks can leave interest rates low to keep supporting their economies.