Kuala Lumpur: Asia-Pacific credit conditions remain under pressure as tensions between China and the US escalate, impacting growth and confidence in the region, according to S and P Global Ratings.
According to BERNAMA News Agency, In a statement, the credit rating agency noted that the Trump administration’s 90-day pause on “reciprocal” tariffs, announced on April 2, offers some temporary relief for Asia-Pacific economies. However, the situation remains precarious. The agency emphasized that the tariffs imposed on April 2 have significantly impacted the Asia-Pacific region due to the large bilateral trade surpluses with the US in many countries. The looming threat of further tariffs from the US continues to pose challenges for global trade and economic growth and could potentially lead to an increase in US consumer inflation.
S and P Global Ratings also warned that confidence in the region is likely to decline further due to halts in new business investments and worsening household sentiment. Additionally, equity and debt markets are expected to remain volatile, creating a negative outlook for Asia-Pacific and global credit.
The agency highlighted that the strained relations between the US and China will have repercussions for Asia-Pacific economies due to their integrated trade ties with both nations. A sharper deterioration in China-US relations could severely disrupt supply chains and global trade flows, exacerbating the situation and potentially leading to a sharper global economic slowdown. These developments have prompted S and P Global Ratings to elevate their assessment of global trade risk to very high.
Despite the partial tariff reprieve providing some cushion for current growth assumptions in the Asia-Pacific region, smaller and trade-centric economies like Vietnam, Thailand, Singapore, and Taiwan may face significant growth challenges. With Chinese exporters seeking new markets and reducing prices to boost sales, locally produced goods in Asia-Pacific and outside the US could face intensified price competition. This redirection of products into regional markets could further strain domestic markets or sectors with excess capacity, potentially leading to an escalation of protectionist measures within the region.