Moody Says US, China Trade War Is Steaming Off Economies In Asia

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The ongoing trade tensions between China and United States are now spreading to other nations and are threatening trading volume of the world further and affecting export dependent countries like Taiwan, Japan and South Korea says Moody Analytics.  These Asian economies are exposed to Chinese economy in two ways as besides exporting to China they also sell products manufactured in China to markets like US. Besides depending on close trade links with China they also tend to domestic demand of China through broad supply chains leaving them highly exposed to the trade war.

Two of the world’s largest economies USA and China began their trade war almost a year ago and now their tensions have grown beyond trade issues to technology and internal security. The tensions between both nations escalated when besides filing several lawsuits against Chinese telecom firm Huawei, USA also placed the firm on a blacklist thereby forbidding firms in USA to have any form of business relationship with Huawei. Since the escalation of these tensions the stock markets in Japan, South Korea and Taiwan have witnessed the biggest market losses in Asia. This is also because they are the biggest exporters of tech components to China and a majority of them supply components to Huawei.

Experts believe that any recovery in these markets will depend on revival of Chinese economy and reduction in escalations between China and USA. Investors in these economies are betting their hopes on upcoming meeting between heads of state of both countries at the G-20 Summit as Trump stated that he would make a decision about imposing additional tariffs on Chinese imports based on the meeting’s outcome. The current market condition is keeping international investors out of these Asian markets and data shows that most FII’s have remained sellers since May. If there is a positive resolution to the trade dispute there will be a substantial bounce within a short period of time.

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