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Trade war hits key APAC industries

Lachlan Maddock
— 1 minute read

Trade tensions are dampening growth in industries major manufacturing and technology sectors throughout the Asia-Pacific, according to a report from S&P Global Standards.

The report – Slowdown Gradually Flowing Through – shows that tariffs and export restrictions are driving consumer and investment uncertainty in the automotive, retail and technology industries. 

The report warned that metals could be the next sector to be impacted with metal prices softening due to decreased infrastructural development and increased supply. China accounts for over half of global demand for raw materials, and an escalation of the trade war could see greater volatility in the industry, further softening cash flows.

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The automotive industry has been hit particularly hard, with light vehicle sales expected to decline by around 3 per cent in China as trade tensions and a devalued renminbi hit Chinese consumers in their wallets. 

While the Chinese government has announced a stimulus plan to support consumption growth, it does not include any new spending, instead waiving car ownership quotas and banning local governments from imposing restrictions on the purchase of new vehicles. Car maker shares rose after the announcement, but it remains unclear whether the stimulus plan will have any effect on the flagging Chinese auto market. 

Korean and Japanese auto manufacturers are facing potential national security tariffs on their products in the US, while demand for more connectivity options and electric vehicles is also driving higher R&D costs with a corresponding increase in the cost of materials. 

Tariffs could force the relocation of manufacturing facilities and increase production costs. 

The report is another blow to the global automotive industry. Establishing more production capacity in the US – one of the main policies of the Trump administration – will take time, and seems increasingly doubtful amid decreasing consumer demand. 

Also impacted by the trade war is the technology industry, with a 10 per cent tariff on Chinese exports of consumer electronics dampening demand throughout the supply chain, and retail, where heightened trade tensions and political upheaval throughout the Asia Pacific are eroding consumer sentiment.

 

Trade war hits key APAC industries
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