In March, factory output across Asia deteriorated, largely impacted by the escalating U.S. tariff conflict and a slackening in global demand, as indicated by private sector surveys released Tuesday. This paints a grim picture for the region’s economic prospects.
Despite a generally gloomy manufacturing narrative, China emerged as an exception, with its factory activity noting an uptick. Producers hurried to dispatch goods ahead of imminent U.S. tariff implementations, contributing to stronger activity in the world’s second-largest economy.
The threat of a broader trade war poses significant challenges for policymakers endeavoring to mitigate growth hindrances while contending with inflationary pressures spurred by rising costs.
In Asia, weaknesses were seen in Japan, South Korea, and Taiwan, where manufacturing performance dwindled in March amid mounting concerns over U.S. trade policies.
Under U.S. President Donald Trump’s administration, a series of tariffs targeting international trade partners have been introduced since his inauguration in January, including impending auto tariff hikes.
Defying the regional trend, China’s Caixin/S&P Global manufacturing PMI escalated to 51.2 in March from 50.8 in February. This figure surpassed market expectations and sustained its position above the neutral 50.0 threshold, indicating growth.
This resurgence echoed an official PMI published Monday, which evidenced China’s manufacturing growth accelerating to a peak not seen in a year.
However, analysts caution that this recovery might be ephemeral. The ongoing trade conflict, marked by a cumulative 20% tariff on Chinese imports since January from the U.S., risks weakening growth momentum. Furthermore, China is anticipated to be hit with reciprocal tariffs soon.
In Japan, manufacturing activity retreated at its swiftest rate in a year, continuing a nine-month downturn. South Korea’s manufacturing activity also declined sharply, driven by tepid domestic demand. Meanwhile, Taiwan’s PMI slipped to 49.8 from February’s 51.5, though Vietnam bucked the trend with a rise to 50.5 from 49.2.
Supplementary data revealed broader regional vulnerability, with South Korean exports rising slower than anticipated and Japan’s significant tankan survey showcasing a one-year low in business sentiment among major manufacturers.
