[JAKARTA] The slowdown in Asia’s manufacturing activity deepened further in June, a warning sign for the region’s growth prospects as tariffs on shipments to the US are poised to increase next week.
Export-reliant economies including Taiwan and Vietnam saw their purchasing managers indexes (PMIs) deteriorate further, with factories reporting a continued decline in new orders, output and staffing as the trade war saps demand.
Taiwan’s PMI slipped to 47.2 in June from 48.6 in May, according to surveys published on Tuesday (Jul 1) by S&P Global. New business and new export sales declined at sharper rates, “with companies frequently commenting on reduced customer demand at home and overseas amid tariff concerns and client hesitancy”, said S&P Global Market Intelligence’s Annabel Fiddes.
Even for manufacturing heavyweight South Korea, which saw its PMI reading climb to 48.7 in June from May’s 47.7, the gauge was still well below the 50 threshold that separates expansion and contraction. Firms saw “pockets of improvement” in the domestic market, but international demand remained sluggish, S&P said.
Tuesday’s PMI figures came as other data sets reflected resilience. In South Korea, for example, June exports rebounded on the back of record sales of semiconductors, while the Bank of Japan’s Tankan survey showed that sentiment among large manufacturers unexpectedly improved a tad. Even in China, a private gauge of manufacturing bounded back, with the PMI at 50.4, as both supply and demand recovered, according to Caixin and S&P.
Still, the Korean exports figures were partly helped by front-loading activity before US President Donald Trump’s reciprocal tariffs rise, while the Caixin PMI stood in contrast to the official manufacturing PMI released on Monday that came in at 49.7.
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Other Asian nations reporting PMIs remaining firmly in contraction territory included Vietnam, Malaysia and Indonesia, which posted the region’s worst PMI at 46.9 in June.
The latest data cloud the prospects for business activity in Asia, the world’s factory floor, as a three-month grace period on Trump reciprocal tariffs is set to end on Jul 9. Washington has pledged to announce more agreements after the Jul 4 holiday that would add to broad frameworks secured with China and the UK.
Uncertainty is rife, with Trump targeting Japan in his latest round of brinkmanship on Monday. He threatened to impose fresh tariffs, citing the nation’s unwillingness to accept US rice exports. Across-the-board duties on Japan goods imported to the US will rise to 24 per cent on Jul 9, barring a deal.
Higher tariffs will cloud the outlook for Japan, which just saw manufacturing activity stabilise in June. Its PMI climbed to 50.1, its highest reading since May 2024 and nudging over to expansion territory as factories aired confidence for the year ahead.
While Japan raised staffing and output in June, “we will need to see a renewed and sustained improvement in customer demand, which remains dampened by ongoing uncertainty regarding US tariffs, in order to see a sustained recovery in production”, Fiddes said. BLOOMBERG
