Asian Economies Stay Pressured by US-China Trade Conflict

Forex News

Trade conflict between the US and China is escalating. Ratings agency Moody's said this week that an escalation of trade tensions in 2018 had become its "baseline expectation", and that Asia was "especially vulnerable" given the integration of regional supply chains. Taiwan, South Korea and Southeast Asian countries such as Singapore and Malaysia are among the most export-dependent economies — which make them especially vulnerable when global trade is under threat.

According to the economists, Taiwan and Malaysia could see their expected growth rates lower by 0.6% lower this year (2.8% and 5%, respectively). South Korea, meanwhile, could lose 0.4% from its estimated 2.9% growth in 2017. The two countries at the front and center of the escalating trade frictions, China and the US, could see a 0.25% downside to their growth prospects this year.

DBS (Singapore's biggest bank) estimates that a full-scale trade war - defined as 15-25% tariffs on all products traded between the US and China - could more than halve Singapore's growth rate next year from a forecast 2.7% to 1.2%. Malaysia's growth rate in 2019 could fall from an estimated 5% to 3.7%.

When US Secretary of State Mike Pompeo opened the US Chamber of Commerce’s Indo-Pacific Business Forum Monday morning, he stressed the strategic importance of maintaining a “free and open” Indo-Pacific region. And he made it clear that when the United States says “free and open,” it means it. Mike Pompeo also announced $113 million in new regional investments focused on technology, energy and infrastructure.