The fallout from the trade war: what next for Asia?
The trade war between the US and China has left Asian economies caught in the middle,
The impact of the US-China trade war on the rest of Asia has been modest so far, says Gareth Leather of London research consultancy Capital Economics. Exports to mainland China from Korea and Taiwan (which often supply intermediate goods that are processed and shipped on to the US) are sharply down since last year, yet that has been largely offset by stronger direct demand from US firms seeking alternative suppliers.
Malaysia, Singapore, Thailand and the Philippines have probably lost a modest 0.1%-0.2% of GDP from the disruption. For less open economies such as India and Indonesia the trade war has been "negligible".
Trade disruption typically strengthens the dollar and weakens the Chinese renminbi as investors turn to the perceived safety of US assets. That leaves these economies caught in the middle, says Udith Sikand in Gavekal Research.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Weak currencies cause domestic inflation and make it more expensive to service foreign debts, but an even weaker yuan could also make their manufacturers less competitive against China. South Korea, Taiwan and Thailand look the most well prepared for this scenario.
Malaysia and India, where central banks have been running dovish monetary policies, look the most exposed to inflation. The dispute has already prompted a reorganisation of global trade networks, says Keegan Elmer in the South China Morning Post. Vietnam's exports to the US were up 29% year-on-year in April and foreign investment has jumped.
A study last year by The Economist Intelligence Unit found Vietnam and Malaysia well-positioned to take overIT equipment manufacturing from China, while Bangladesh, India and Vietnam couldgrow their garment manufacturing industries.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
How to invest in nuclear power
We need nuclear power to go green, says Dominic Frisby. But there is a better option than huge power stations
By Dominic Frisby Published
-
Chase slashes its easy-access savings rate – is it time to switch?
The Chase easy-access savings account has proved popular with savers thanks to its competitive rate and bonus deals. But, as the rate has dropped, has it lost its charm?
By Katie Williams Published