Asian factories hobbled by US tariff risks despite modest relief
TOKYO : Factory activity in many Asian economies shrank in June as US tariff uncertainty kept demand low, but signs of modest relief for manufacturers raise the stakes in trade talks with Washington amid the region's gloomy economic recovery prospects.
The underlying softness in private surveys released today highlights the challenges facing policymakers as they try to navigate US President Donald Trump's moves to shake up the global trade order with sweeping tariffs.
Japan's manufacturing activity expanded for the first time in 13 months, and South Korea's activity contracted at a milder pace, private surveys showed today.
China's Caixin purchasing managers' index (PMI) also expanded in June due to an increase in new orders, confounding an official survey that showed activity shrinking for a third straight month.
'However, stalled trade talks with the US, prospects of weakening global demand and lacklustre growth in China will likely weigh on Asia's factory activity, analysts said.
'Overall, manufacturing supply and demand recovered in June,' said Wang Zhe, economist at Caixin Insight Group on China's PMI.
'However, we must recognise that the external environment remains severe and complex, with increasing uncertainties.
'The issue of insufficient effective demand at home has yet to be fundamentally resolved,' Zhe said.
The Caixin/S&P Global manufacturing PMI rose to 50.4 in June from 48.3 in May, surpassing analysts' expectations in a Reuters poll and the 50-mark that separates growth from contraction.
Japan's final au Jibun Bank PMI rose to 50.1 in June from 49.4 in May due to an upswing in output, but overall demand remained weak as new orders shrank on uncertainty over US tariffs, a private sector survey showed.
Factory activity in South Korea contracted for the fifth straight month in June at 48.7, though the pace of decline eased due to companies' relief over a snap presidential election on June 3 that ended six months of uncertainty.
Trump trade shock
'Volatility in US tariff policy and economic recovery uncertainty are expected to persist in the second half,' South Korean industry and trade minister Ahn Duk-geun said, underscoring the urgency in Seoul to reach a trade deal with the US.
The comments came after separate June data showed exports from Asia's fourth largest economy rebounded but shipments to the US and China remained weak.
Steep tariffs imposed by Trump have upended global trade and heightened uncertainty for many Asian economies heavily reliant on exports to the US market.
Negotiators from more than a dozen major US trading partners are rushing to reach agreements with Trump's administration by a July 9 deadline to avoid import tariffs jumping to higher levels.
While China is continuing negotiations for a broader trade deal with the US, Japan and South Korea have so far failed to gain concessions on tariffs imposed on their mainstay export items like automobiles.
India was a significant outlier in the region, as manufacturing activity accelerated to a 14-month high in June, driven by a substantial rise in international sales that helped spark record-breaking hiring.
The PMI climbed to 58.4 in June from the previous month's 57.6 and in line with a preliminary estimate released last week.
Factory activity in many other countries in Asia shrank.
Indonesia's PMI fell to 46.9 in June from 47.4 in May, while that of Vietnam stood at 48.9 in June, down from 49.8 in the previous month, the private surveys showed.
Malaysia's PMI rose slightly to 49.3 last month, from 48.8 in May, while that of Taiwan dropped to 47.2 in June from 48.6 in the previous month, the surveys showed.
Shivaan Tandon, markets economist, at Capital Economics, said that given the broader weakness in manufacturing in the region, policymakers are likely to focus their attention on reviving growth.
'With worries about growth having taken precedence over those about inflation, we think most central banks in the region will continue to loosen monetary policy and by more than most analysts expect,' Tandon said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
5 hours ago
- The Star
Anwar: Proposed carbon tax not hindrance for investors
Prime Minister Datuk Seri Anwar Ibrahim - Photo: Bernama PARIS: As the proposed carbon tax is being finalised, the government today gave an assurance that its implementation will not create a problem for investors. Prime Minister Datuk Seri Anwar Ibrahim said he knew that the trend towards decarbonisation is strong and compelling. "But I think we have to be very realistic. The proposed carbon tax should not be seen as too problematic at the expense of investing companies,' he said during a question and answer session at the Roundtable Meeting with Captains of Industry in Paris, the capital of France on Friday. Also present were Investment, Trade, and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, Foreign Minister Datuk Seri Mohamad Hasan, Transport Minister Anthony Loke, Agriculture and Food Security Minister Datuk Seri Mohamad Sabu and Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said. Anwar, who is here on a two-day official visit, said the implementation has to be done cautiously and gradually. "We are finalising that in the next few months actually,' he said, adding that they are looking at sectors that are the biggest carbon emitters first. Despite the palm oil industry being an important sector for Malaysia, Anwar said any new plantations on peat soil have been stopped due to its high carbon emissions. The government is planning to introduce the carbon tax in 2026, specifically targeting the iron, steel and energy industries. It is part of the government's broader strategy to promote the use of low-carbon technologies and meet emission reduction goals. Industry leaders who attended the session with the Prime Minister praised the government and the country for providing a good investment climate in Malaysia. On tourism, Anwar said the number of tourists from France visiting Malaysia has increased tremendously. "We have direct flights from Paris now. You can swim the whole year due to our favourable climate,' he quipped, citing the newly introduced Kuala Lumpur-Paris route by Malaysia Airlines. Anwar also assured French companies considering investments in Malaysia or the ASEAN region that both represent some of the fastest-growing and most dynamic economies in the world. - Bernama
Free Malaysia Today
5 hours ago
- Free Malaysia Today
Indonesia offers to cut duties on US goods to ‘near zero' in tariff talks
Indonesian state carrier Garuda will buy more Boeing planes as part of a US$34 billion pact. (AFP pic) JAKARTA : Indonesia has offered to cut duties on key imports from the US to 'near zero' and to buy US$500 million worth of US wheat as part of its tariff talks with Washington, its lead negotiator and a wheat industry association said today. Chief economics minister Airlangga Hartarto, who is Indonesia's lead negotiator, also confirmed that state carrier Garuda Indonesia would buy more Boeing planes as part of a US$34 billion pact with US partners due to be signed next week. Indonesia, which ran a goods trade surplus of US$17.9 billion with the US in 2024 according to the US trade representative, is facing a 32% tariff in US markets and has proposed increasing US imports to facilitate trade talks between the two sides. Airlangga said the Indonesian government has offered to cut tariffs on key American exports, including agricultural products, to near-zero from between 0% and 5% at present. 'It will be near zero (tariffs for US main exports), but it will depend as well on how much the tariffs we get from the US,' Airlangga said. Garuda's CEO has said it is in discussions with US Boeing to buy up to 75 units of aircraft. Garuda group did not respond to requests for comment today. The wheat purchases are also part of next week's pact with US partners. The chairman of Indonesia's wheat flour mills association, Franciscus Welirang, said its 'members will purchase 2 million tonnes in total through tenders with a competitive price.' 'The point is all of the members will buy US wheat,' Welirang, who is also a director at Indofood, told Reuters. The US counterparts in the wheat deal include Cargill, Bunge Global, Pacificor, Archer-Daniels-Midland, Columbia Grain International and United Grain Corporation, Welirang added. US exports to Indonesia include soybeans, petroleum gases and aircraft, Indonesian government data showed. When asked whether the trade talks include military deals, Airlangga said they were 'not part of the negotiation'. Susiwijono Moegiarso, a senior official with Indonesia's coordinating ministry for economic affairs, told Reuters that in return, Jakarta has asked the US for preferential tariffs on its main exports, including electronics, textiles and footwear. 'We want them to lower the tariffs (for those goods) as low as possible,' he said. Indonesia has also offered the US opportunities to invest in critical minerals projects, including in the country's abundant resources of copper, nickel and bauxite.
The Star
5 hours ago
- The Star
FBM KLCI closes slightly higher ahead of Trump's trade decision
KUALA LUMPUR: The FBM KLCI ended slightly higher on Friday, as investors remained cautious ahead of U.S. President Donald Trump's July 9 tariff deadline. Trump said his administration would begin sending letters to trading partners on Friday, outlining unilateral tariff rates that will take effect on Aug 1. The FBM KLCI closed 1.2 points higher, or 0.08%, at 1,550.19, after reaching an intraday high of 1,551.78. For the week, the benchmark index advanced about 1.4%. Winners and losers were closely balanced, with 489 gainers and 466 losers, while 509 counters were unchanged. A total of about 3.4 billion shares worth RM2.5bil changed hands. Genting Plantations was the top gainer, rising 22 sen to RM5.23, followed by NationGate, which climbed 11 sen to RM1.78, Heineken, which gained 10 sen to RM25.44, and Hong Leong Industries, which added 10 sen to RM13.52. Conversely, Nestle tumbled RM2.48 to RM77.52, Dutch Lady slipped 54 sen to RM29.14, PETRONAS Dagangan eased 40 sen to RM21.56, and Westports fell 22 sen to RM5.58. Meanwhile, the ringgit slipped 0.04% to 4.2242 against the US dollar but edged up 0.05% to 3.3154 against the Singapore dollar. Regional markets ended broadly lower, with losses in South Korea, Taiwan, Hong Kong, and Singapore outweighing modest gains in Japan and China. Among the key markets: Japan's Nikkei 225 gained 0.06% to 39,810.88; South Korea's Kospi lost 1.99% to 3,054.28; Hong Kong's Hang Seng Index fell 0.65% to 23,916.06; China's CSI 300 Index added 0.36% to 3,982.20; Taiwan's Taiex closed down 0.73% at 22,547.50 and; Singapore's Straits Times Index fell 0.18% to 4,012.21 points.
