Trade Trouble Brews in Asia as Export Lifelines Targeted

(Bloomberg) --

The tariff truce between China and the U.S. last month eased some of the tension and gave stock markets hope that a lasting peace is within reach. But with duties on hundreds of billions of dollars of goods still in place and a separate regional skirmish heating up, don’t look for an end soon in the global trade wars.

The latest signs of Asia’s slump are due later this week. Chinese imports probably dropped in June, a report Friday is forecast to show, after contracting every month this year except April. The culprits: a weaker domestic economy and softening overseas demand. Exports in June are also expected to shrink.

The slowdown is spreading across the region, with Japanese, Taiwanese, and South Korean exports also hit. Adding to the stress are signs that a free-trade-espousing country like Japan is using protectionist trade policies to achieve a political goal.

Japan is considering removing South Korea from a list of trusted nations that receive preferable export treatment — the latest turn in a feud dating back generations to the colonization of the Korean peninsula. As a result, South Korea’s Samsung has lost about 16 trillion won ($13 billion) in market value this month because it relies on Japanese materials.

While it’s unclear yet if Japan’s decision will lead to massive disruption of trade flows, it adds to an already growing list of risk for companies and investors.

Charting the Trade War

The trade war has cost American soybean growers their biggest customer, and the industry has struggled to find other buyers big enough to fill the hole left by China.

Today’s Must Reads

• Made in America | U.S. tariffs on steel imports had the intended effect of reducing supplies from abroad, but also brought some unintended pain to American producers.
• Boycott Japan? | Angered by Japan’s move to restrict exports of  manufacturing materials to their country, South Koreans have taken to Instagram and other social-media.
• French factories | France’s resilience to a euro-area industrial slowdown shows signs of eroding as confidence swoons and the central bank reduces the growth outlook.
• Africa trade pact | While other countries turn protectionist, African nations begin a multiyear process to remove barriers including tariffs on 90% of commodities.
• A history lesson | An American diplomat’s 1946 cable from Moscow shows how, in a new Cold War with China, the U.S. is poorly prepared and unlikely to change Beijing’s course.

Economic Analysis

• German rebound | Industrial production rebounds in June, but just below economists’ forecast
• Asia’s big week | Here’s a look at the major economic reports coming from South Korea to India
• U.S.-India talks | A team from USTR goes to New Delhi for talks that had stalled over tariffs

Coming Up

• July 8: EU trade chief Malmstrom speaks in Brussels
• July 10: U.K. trade balance
• July 12: China trade data, South Korea export prices

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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