No winners in US-China trade conflict as Asia-Pacific braces for impact: Report

IANS April 15, 2025 180 views

The escalating trade conflict between the United States and China is creating significant economic uncertainty across the Asia-Pacific region. S&P Global Ratings highlights the potential for widespread economic disruption, with small and export-dependent economies facing the most substantial risks. Governments and businesses are exploring alternative trade strategies, including regional trade blocs and bilateral agreements, to mitigate potential damages. The ongoing tensions threaten to undermine business confidence, consumer spending, and overall economic activity in the global marketplace.

"Trade tensions that remain unresolved could have a marked impact on credit quality" - S&P Global Ratings Report
New Delhi, April 15: There are no winners in a trade conflict and the tussle between China and the US raises the risk of economic and geopolitical fallout, a report by S&P Global Ratings said on Tuesday.

Key Points

1

Asia-Pacific caught between US-China economic power struggle

2

Regional trade blocs emerging as potential mitigation strategy

3

Export-dependent economies face significant economic risks

4

Manufacturers experiencing revenue and profit compression

Home to sizable manufacturing activities, Asia-Pacific is highly dependent on exports to the U.S. and China for growth. At the same time, Asia-Pacific depends on the US mostly for security.

The region could find itself pushed to take sides or walk a delicate line between the two large economies, the report stated.

To counteract tariffs, Asia-Pacific governments are exploring the formation of regional trade blocs or bilateral trade agreements. These efforts could accelerate, expediting the need to relocate supply sources and production.

“Businesses may hold back investments as they reassess the trade landscape. To offload excess production, exporters may seek new markets and cut prices. For some economies, locally made products may be unable to compete against the influx of these competitive exports,” the report noted.

To insulate local industries, affected economies might impose protectionist measures, thereby escalating trade tensions. Governments may use economic stimulus to reduce the hits to businesses and households, which would worsen fiscal balance sheets. In our view, small and export-dependent economies would face an outsized hit.

Unsurprisingly, if the paused US tariffs are ultimately implemented as initially announced, the economic fallout for global markets would be broad and deep.

“Trade tensions that remain unresolved as the pause ends could have a marked impact on credit quality. Either way, the pause is for 90 days, and the prevailing uncertainty is likely to further undermine business and consumer confidence, heightening concerns about corporate investment, employment and consumer spending, and overall economic activity,” the report stressed.

China's economic growth is seeing rising downside risk amid rising trade tensions with the US as its export engine falters from weaker global demand. The country's domestic growth engine remains subdued, given the lingering real estate crisis, which is dragging down confidence.

For the manufacturers, revenue and profit compression is weighing down capital expenditure and labour needs. Cautious spending among households could intensify amid rising unemployment risks and a gloomier global backdrop, according to the report.

Reader Comments

J
James L.
This is exactly why we need stronger regional partnerships in Asia. RCEP was a good start but we need more economic cooperation that isn't dependent on US-China relations. The middle powers should take more initiative.
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Samantha K.
As someone working in manufacturing, this is really worrying 😟 Our company just announced hiring freezes because of the uncertainty. When will politicians realize trade wars hurt real people?
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Rajiv P.
Interesting analysis but I think the report underestimates how resilient Asian economies can be. We've weathered crises before and found ways to adapt. The shift to more regional trade might actually be beneficial long-term.
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Mei L.
The real estate crisis in China is the elephant in the room here. Even without trade tensions, their economy was already slowing down significantly. This just adds fuel to the fire.
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Thomas W.
Respectful criticism: The article focuses too much on economic impacts and not enough on the geopolitical consequences. Countries being forced to choose sides could lead to security realignments that last generations.
A
Anika R.
Maybe this will finally push more countries to develop their domestic markets instead of relying so heavily on exports. Painful in short term but healthier long-term strategy! 🌏

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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Tags:
US-China Trade War Asia-Pacific Economy S&P Global Ratings Trade Tensions Economic Impact Global Markets
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