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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