US-China Trade War: Disruption & Diversion
Comment of the Day

October 24 2018

Commentary by Eoin Treacy

US-China Trade War: Disruption & Diversion

Thanks to a subscriber for this report from Maybank which may be of interest to subscribers. Here is a section:

The US-China trade war is disrupting the electronics supply chain, which is centered on China and many of the Northeast Asian economies. PMIs are coming off for Korea, Taiwan and Singapore, key electronic producers in the supply chain. Electronics exports around the region are also slowing. For ASEAN (excl. Spore), the electronics-related data is somewhat mixed, with softer exports but tentative signs of higher orders and investment.

Some of ASEAN’s exports in products targeted by US-China tariffs are performing strongly, including Indonesia’s and Malaysia’s mineral products. There are also visible signs of greater FDI into ASEAN, particularly Vietnam, Thailand and Malaysia, as firms adopt a more flexible production network outside China to circumvent the tariffs. FDI into manufacturing for these countries has picked up significantly in the past two quarters. 

Eoin Treacy's view

US businesses have been frontloading their purchases both to stock up for the holidays and to avoid tariffs. That inventory build is flattering import figures but says little about the potential for demand next year.

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