APAC Credit Conditions Remain Firmly On The Downside Amid China-US Trade Tension -- S&P

KUALA LUMPUR, April 15 (Bernama) -- Asia-Pacific credit conditions remain firmly on the downside, given the escalation in China-US relations and uncertain US trade policy, which are hitting growth and confidence in the region, said S&P Global Ratings.

In a statement today, the credit rating agency said while the Trump administration's 90-day pause of "reciprocal" tariffs (announced on April 2) offers some reprieve for Asia-Pacific economies, the region is not out of the woods.

“The April 2 tariffs affected Asia-Pacific the most. This reflects the prevalence of large bilateral trade surpluses with the US across most countries.

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“The threat and imposition of tariffs by the US continue to loom over global trade and economic growth and could also reignite US consumer inflation,” it added.

S&P Global Ratings further said that confidence is set to deteriorate further amid halts in new business investments and worsening household sentiment.

“Furthermore, equity and debt markets are likely to stay volatile. Taken together, these economic, consumer, and financial market developments are negative for Asia-Pacific and global credit,” it said.

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Meanwhile, it said the strained US-China relations will affect Asia-Pacific economies, given the region's integrated trade ties with both countries.

“Additionally, a sharper deterioration in China-US relations will further strain confidence, and severely disrupt supply chains and global trade flows.

“Together, these events could spur a sharper global slowdown. These rapid developments have prompted us to raise our assessment of the global trade risk to very high,” it said.

For the rest of Asia-Pacific, the partial tariff reprieve broadly cushions current growth assumptions, said the credit rating agency. 

“However, small and trade-centric economies (such as Vietnam, Thailand, Singapore, and Taiwan) may face greater obstacles to growth.

“Locally produced goods in Asia-Pacific and outside the US could face more intense price competition as Chinese exporters scout new markets and cut prices to accelerate sales.

“A redirection of products into regional markets would further squeeze domestic markets or sectors with excess capacity and this could stoke further escalation of protectionist measures within Asia-Pacific.,” it said.

-- BERNAMA