Synopsis
A recent report indicates that the ongoing trade conflict between the US and China holds significant risks for economic and geopolitical stability in the Asia-Pacific region, which heavily relies on both nations for trade and security.Key Takeaways
- No winners in the trade conflict.
- Asia-Pacific's reliance on US and Chinese exports.
- Increased protectionism may escalate tensions.
- Potential relocation of supply chains.
- Businesses likely to hold back on investments.
New Delhi, April 15 (NationPress) There are no victors in a trade dispute, and the conflict between China and the US heightens the potential for economic and geopolitical repercussions, according to a report released by S&P Global Ratings on Tuesday.
The Asia-Pacific region, which has significant manufacturing operations, is heavily reliant on exports to both the US and China for its economic growth. Additionally, the region is largely dependent on the US for its security needs.
The report notes that the region may be compelled to choose sides or navigate a challenging path between these two major economies.
In response to tariffs, governments within Asia-Pacific are considering the creation of regional trade blocs or bilateral trade agreements. These initiatives could gain momentum, accelerating the need to relocate supply chains and manufacturing.
“Firms might postpone investments as they reevaluate the trade environment. To manage excess production, exporters could pursue new markets and lower prices. For certain economies, locally produced goods may struggle to compete against the influx of these competitive exports,” the report highlighted.
To protect local industries, affected nations might adopt protectionist policies, which could heighten trade tensions. Governments may implement economic stimulus measures to alleviate the impact on businesses and households, although this could worsen fiscal conditions. In our assessment, smaller and export-reliant economies would face a disproportionate impact.
If the paused US tariffs are eventually enforced as initially planned, the economic repercussions for global markets would be extensive.
“Unresolved trade tensions as the pause concludes could significantly affect credit quality. Regardless, this pause lasts for 90 days, and the ongoing uncertainty is expected to further erode business and consumer confidence, raising concerns regarding corporate investments, employment, consumer spending, and overall economic activity,” the report emphasized.
China's economic growth faces increasing downside risks amid escalating trade tensions with the US, as its export sector struggles due to weaker global demand. The country’s domestic growth engine remains lackluster, primarily due to a persistent real estate crisis that is undermining confidence.
Manufacturers are experiencing revenue and profit pressures that are dampening capital expenditures and labor requirements. Household spending may also become more cautious amid rising unemployment risks and a deteriorating global economic outlook, as per the report.
