Asia: Supply chain adjustment - ANZ

ANZ analysts suggest that with the US-China trade dispute shaping up to be a long drawn-out affair, there have been some adjustments in Asia’s supply chain.

Key Quotes

“China’s exports to the US have been contracting, while exports to the US from some other Asian economies, notably Vietnam and Cambodia, have picked up.”

“Taiwan and Singapore have also seen higher exports to the US. US trade deficit with China is narrowing, but its deficit with the lower-tariff countries is widening.”

“Challenges lie ahead, however. Already, Vietnam’s widening trade surplus with the US has caught the attention of President Trump, and a number of Asian economies are already on US Treasury’s FX Monitoring List.”

“Also, it appears that most of the supply chain adjustments have thus far involved re-routing of exports as opposed to relocation of production. China’s outbound direct investment has yet to show signs of a pick-up. Indeed, its M&A activity is seeing the slowest H1 in five years, with no notable increase in its activity in Asia.”

“The same is seen for US FDI and M&A activity, reflecting President Trump’s ‘America First’ policy. Overall, the latest data suggests a slow start in Asia’s restructuring with a long way to go.”