Asian Trade Bellwethers Just Reminded Us the Worst Isn’t Over

(Bloomberg) --

If the world economy is stabilizing as some analysts suggest and many investors are betting, a couple of Asia’s biggest exporters didn’t get the memo.

Shipments of goods from Japan, the world’s third-largest economy, suffered their largest drop in three years in October, hurt not just by the U.S.-China trade war but also by extreme weather at home. Japan's exports to South Korea slumped 23% amid a lingering dispute that’s soured trade relations between the two.

Another of East Asia’s manufacturing powerhouses, Taiwan, also showed ongoing weakness in overseas demand, though perhaps with some signs of bottoming. Taiwan’s export orders fell 3.5% in October, better than the expected 4.5% decline and the 4.9% drop in September.

That follows a mixed picture earlier this week from Singapore, where data showed better-than-expected demand for electronics, but exports overall still had their worst year-on-year showing since June.

Another health check on Asia will come Thursday when South Korea — the world’s trade canary — releases a reading on export demand for the first 20 days of the month. Where South Korea goes, others typically follow.

Taken together, the mixed set of numbers is a reminder that even amid some signs that the worst may be past for global demand, there’s still a lot hanging on whether or not the U.S. and China reach a deal.

And on that score, there may be a case to temper the optimism.

Hu Xijin, editor-in-chief  of China’s Global Times newspaper, tweeted Wednesday that few Chinese expect a deal soon — and even if one is reached, it “will be limited.” He also warned that China may be ready for a deal, but is prepared for a prolonged trade war.

U.S. President Donald Trump also sounded ready for either outcome. “I have a good relationship with China. We’ll see what happens, but I’m very happy right now,” he told reporters on Tuesday in Washington. “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”

Charting the Trade War

America’s high-tech workers may still gravitate to the obvious spots, like Silicon Valley or the home of federal funding, Washington D.C. But behind them are plenty of regional college towns attracting workers in science, technology, engineering and mathematics. The Bloomberg Brain Drain Index tracks the hemorrhage of white-collar jobs and advanced-degree holders and the decline of STEM pay. 

Today’s Must Reads

• Tariff tug-of-war | China and the U.S. are locked in the tough stage of negotiations where it’s too soon to say whether it’ll end with a partial deal or with talks breaking down again. 
• Texas ranger | Trump’s effort to tout U.S. economic growth will clash with his trade war on Wednesday when he visits an Apple factory in Texas. 
• New Nafta snags | A union leader urged House Democrats to withhold support for the stalled U.S.-Mexico-Canada agreement until Trump improves enforcement provisions.
• Huawei backing | German Chancellor Angela Merkel is sticking to her guns in allowing Huawei to participate in Germany’s 5G network, over her party’s objections.
• Factory fight | India is planning to offer more than 300 companies including Tesla incentives to set up factories in a bid to capitalize from the U.S.-China trade war.

Economic Analysis

• Cold comfort | A slightly milder-than-anticipated decline in imports in October adds to evidence that the pullback in activity following the sales-tax hike probably won’t knock Japan’s economy completely off its feet.
• Got Grinch | Bloomberg Economics’ analysis of critical variables in the health of seasonal U.S. sales points to a lackluster outcome for 2019. 

Coming Up

• Nov. 21: South Korea exports and imports
• Nov. 21: EU trade ministers meet in Brussels

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To contact the editor responsible for this story: Michael Arnold at marnold48@bloomberg.net, Brendan MurrayZoe Schneeweiss

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