Asia's Factory Activity Shrinks In May As U.S. Tariffs Bite

Asia’s factory activity contracted in May amid soft demand in China and the impact of U.S. tariffs, according to private surveys released recently—signaling a worsening outlook for the once fast-growing region, Leika Kiohara reported for Reuters.

With many Asian countries making little headway in trade negotiations with the U.S., analysts say businesses are unlikely to increase production or investment anytime soon.

Export-driven economies like Japan and South Korea continued to see declining manufacturing activity last month, with new automobile tariffs imposed by President Donald Trump clouding their export prospects.

Meanwhile, an official Chinese survey released Saturday showed that China’s manufacturing activity shrank for a second consecutive month, highlighting deepening weakness in the world’s second-largest economy.

With many Asian countries making little headway in trade negotiations with the U.S., analysts say businesses are unlikely to increase production or investment anytime soon.

“It’s hard to expect a pickup in Asia’s manufacturing activity with countries in the region slapped with quite high ‘reciprocal’ tariffs,” said Toru Nishihama, chief emerging markets economist at Dai-ichi Life Research Institute.

“With domestic demand weak, China is flooding Asia with cheap exports, which is also putting deflationary pressure on the region’s economies,” he added.