Trade war hits Asia factories as exports, production slide
[HONG KONG] Manufacturing activity across several Asian nations weakened in May as US tariffs and trade uncertainty eroded demand.
In Vietnam, new export orders contracted for a seventh straight month and input costs fell for the first time in about two years, according to S&P Global data published on Monday (Jun 2).
In Taiwan, output and new export sales all fell for a second month, Indonesia saw the steepest drop in new orders since August 2021, and South Korean manufacturers recorded the deepest decline in output in nearly three years.
Vietnam, Indonesia, Taiwan, Japan and South Korea all recorded a contraction in overall activity, with the Purchasing Managers Index remaining below the 50-no change mark. Activity in the Philippines, meanwhile, grew at a slower pace.
The figures reflect the ongoing uncertainty amid US President Donald Trump's tariff campaign and the start-stop nature of US trade policies. Trump ratcheted up tensions late last week, vowing to double steel and aluminium tariffs and accusing China of violating an agreement to lower levies. Beijing retaliated on Monday by slamming Trump's claim and lodging accusations that the US had introduced new discriminatory restrictions.
Bank of Korea governor Rhee Chang-yong said the outcome of trade negotiations between the US and China will have an impact for all of Asia's economies, highlighting their significance beyond the bilateral level.
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'When we actually measure the impact of US tariffs on us, the indirect impact through China is very important because we are very much connected with them through supply chains,' the governor said on Monday.
Trump's 'Liberation Day' tariffs remain in a grey zone as a US court rejected them, followed by a successful appeal from the administration. If they proceed, US levies would rise to a century-high next month.
Manufacturers in Asia cited this whiplash as dampening demand now and in the future.
'Weaker demand conditions and increased client hesitancy to commit to new work amid US tariffs' hit sales in Taiwan, according to S&P Global, prompting a cut to employment and purchases. Businesses across the region cited lower demand rippling through the supply chain and on the factory floor.
The May data follow a month when exports and freight activity surged across the region as US firms frontloaded shipments during Trump's 90-day tariff pause. South Korea's exports contracted in May as shipments to the US declined by 8.1 per cent, according to data released on Sunday by the customs office.
Looking forward, there are some initial indicators that Trump's tariff pause to allow for negotiations and the tentative deals with the UK and China may help improve activity. In Vietnam, a major producer of clothing, shoes and smartphone parts, companies said an improvement in production and a more optimistic outlook was aided by tariff stability. BLOOMBERG
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Business Times
22 minutes ago
- Business Times
Asean's export rush wanes as tariff clock ticks down
[SINGAPORE/KUALA LUMPUR/HANOI/JAKARTA] South-east Asia's export boom may be running on borrowed time as traders rush to front-load goods ahead of the end of US President Donald Trump's 90-day tariff pause on Jul 9, masking signs of fading momentum. While April's export data climbed year on year across much of the region, a closer look reveals a month-on-month slowdown that is already hitting Thailand, Vietnam and the Philippines, with the rest of South-east Asia likely to follow by the second half of the year. April trade figures suggest not just front-loading, but also a possible rerouting of US-destined China-origin goods through Asean economies, said Nomura analysts Rob Subbaraman and Toh Si Ying. Such front-loading means Asian export growth in the second quarter of the year could be stronger than projected, noted the duo in a May 28 report. But they warned that this may just be 'a brief respite before an Asian export slump in H2, driven by the inevitable payback from front-loading and an overall slowdown in global trade activity caused by the highest US tariff rates in over 80 years and historically high business uncertainty'. The major exporters in trade-reliant South-east Asia – Indonesia, Thailand, Malaysia, Vietnam and Singapore – face a looming slowdown. On the other hand, the Philippines – a net importer – saw front-loading taper off early. It could ultimately benefit from trade diversion and a potential US deal, as tariffs position its goods to become more competitive. The Business Times breaks down how the shifting trade tide is unfolding across the region. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. 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Pending clearer outcomes, UOB maintains its 2025 export growth for Malaysia forecast at 3.8 per cent. — TAN AI LENG Thailand: export fever cooling Thailand may have notched its tenth straight month of year-on-year export growth in April, but the pre-tariff shipping rush is losing steam. Exports rose 10.2 per cent from the prior year – a clear pullback from March's 17.8 per cent surge. Thailand posted US$25.6 billion in exports in April, amounting to a US$3.3 billion trade deficit, revealed data released by the kingdom on May 26. Bank of America's emerging Asia economist Pipat Luengnaruemitchai said April's cooling confirms the house's view that the strong first-quarter performance was temporary, driven by front-loaded shipments ahead of anticipated tariffs. In a May 26 report on Thailand's trade balance, he said: 'Combined with limited domestic production gains and increasing external pressure, Thailand's export and trade balance outlook remains weak in the coming quarters.' He added that more Chinese products may enter the kingdom as Beijing sources for alternative markets. Industrial and agro-industrial products continue to be key growth drivers of Thailand's exports. Notably, a jump in gold exports for a second month kept Thailand's exports robust. Maybank analysts Erica Tay and Chua Hak Bin noted in a recent report that exports of the yellow metal surged 250.5 per cent in April (and 269.5 per cent in March), which accounted for a third of export growth in Thailand – one of the largest physical gold trading hubs. While there is little visibility on bilateral trade talks with the US, the house expects tariffs on Thailand to stay within 30 per cent. — GOH RUOXUE Vietnam: tariff boost to factory blues Vietnam posted strong export growth in April, driven by a spike in orders after the US delayed its 'Liberation Day' tariffs and temporarily exempted some electronic goods. Despite facing a looming 46 per cent reciprocal tariff – among the highest in Asia – Vietnam's exports and imports surged in April by 19.8 per cent and 22.9 per cent year on year to US$37.45 billion and US$36.87 billion, respectively, Vietnam Customs indicated. However, exports dipped 2.8 per cent from March, while imports were flat. Vietnam's electronics exports surged nearly 59 per cent in April, while footwear and textiles rose more than 20 per cent and 17 per cent, respectively, boosting its trade surplus with the US by 25 per cent in the first four months of 2025. At the same time, its trade deficit with China widened by more than 44 per cent. The balance of trade is a key point in the tariff negotiations between Hanoi and Washington. The two countries concluded their second round of trade talks on May 22 and are expected to continue in early June, based on a statement from Vietnam's trade ministry. 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Preliminary data from the Philippine Statistics Authority showed weaker trade in April, with total value down 2 per cent year on year. Exports rose 7 per cent but marked their slowest growth this year and fell 9.2 per cent from March, while imports dropped 7.2 per cent year on year and 8 per cent monthly – the first decline since December. Electronics remained the top export, accounting for more than half of outbound sales. The trade deficit from January to April narrowed slightly to US$15.9 billion. April's import slump reversed the sharp 17.8 per cent surge seen in March – the strongest since August 2022. The steepest drop came from mineral fuels and lubricants, down 35.1 per cent, while imports of raw materials and intermediate goods – a key gauge of production outlook – swung from a 22.4 per cent rise to an 11 per cent decline. 'It was partly tied to softer prices (on weakening greenback) but perhaps also evidence of moderating demand,' added Mapa. The Philippines' economy relies heavily on domestic consumption, which accounts for about two-thirds of the country's gross domestic product. –– JAMILLE TRAN
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Business Times
38 minutes ago
- Business Times
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