Asia’s Resilient Export Engines Succumb to Global Slowdown

(Bloomberg) --

First, a pop quiz. How many of the world’s 10 busiest container ports are in the U.S. or Europe?

The answer: zero. 

According to the World Shipping Council’s top 50 ranking by 2018 container volume, seven are in China, another is in Singapore, one is South Korean and No. 10 is in United Arab Emirates. Rotterdam comes in at No. 11 for the Netherlands and it’s not until 17th place that the U.S. gets on the board with Los Angeles.

The point is, to understand where rising tariffs and trade wars are taking their biggest toll, look to Asia — and not just China. Numbers this week show the region’s factory hubs are pitched in a steady descent.

• South Korean exports, a bellwether for global trade, plunged again in October. Shipments declined 15% from a year earlier, pushed down by a slide in semiconductor and petrochemical shipments. Imports also fell 15%.
• Purchasing manager indexes for Japan, South Korea, Malaysia and Indonesia remained in contraction territory while Taiwan also moved below 50, the dividing line between contraction and expansion.
• Even Vietnam, which has been more resilient than many of its peers, slid to the dividing line. Thailand joined Vietnam on the edge of decline.
• IHS Markit said India’s October manufacturing purchasing managers’ index fell to 50.6 from 51.4 in September.
• China’s Caixin index — which is more weighted toward private manufacturers — rose to 51.7 from 51.4, but an official gauge released Thursday dropped to its lowest level since February.

“The impact of the trade war becomes increasingly visible,” said Chang Shu, chief Asia economist for Bloomberg Economics. Even economies that had been holding up better “have started to wobble.”

Whether the regional shakes become a full-blown collapse is unclear, particularly as the outlook for the U.S.-China trade war grows increasingly clouded. Bloomberg News reported this week that China has little confidence that a comprehensive long-term deal can be reached. President Donald Trump on Thursday tweeted that he and Chinese leader Xi Jinping are scouting for a place to sign “phase one’’ agreement, which he said would be “about 60% of total deal.”

That sounds promising until you realize that, to pressure China into finishing the remaining 40%, Asia and the rest of the world may have to live with U.S. tariffs on Chinese products for the foreseeable future.

Charting the Trade War

Bloomberg Economics estimates that EU trade deals currently under negotiation could permanently create $80 billion of annual exports. Trade wars, and Britain’s divorce from the EU could permanently destroy as much as $500 billion. 

Today’s Must Reads

• WTO warning | The world economy might be in more trouble than you think, World Trade Organization Director-General Roberto Azevedo writes in an Op-Ed for Bloomberg Opinion.
• Mexico move | Mexico’s low production costs have made it a winner in the global trade war. Yet it just lost a big textile investment to countries where operation is even cheaper.
• India reprimand | The U.S. won a case against India at the WTO alleging improper use of export subsidies valued at more than $7 billion.
• Brexit burden | Trump said Boris Johnson’s Brexit deal will make it difficult for the British prime minister to strike a trade pact with the U.S. after the U.K. leaves the European Union.
• Art relief | Christie’s is among the first companies to file for relief from the latest round of Trump’s tariffs on Chinese imports, arguing the duties would hurt its business and punish the U.S. art market.

Economic Analysis

• Increasingly lackluster | Bloomberg Economics’ global GDP tracker shows the pace of expansion has slowed to 2.4% in the third quarter, down from 4.7% at the start of 2018.
• Trough may be nearing | South Korea’s export slump may be approaching a trough, but uncertainty remains high. 

Coming Up

• Nov. 5: U.S. trade balance
• Nov. 7: Australia trade balance
• Nov. 8: China, Germany and France trade balances

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

©2019 Bloomberg L.P.