Tariff risks hit Asia's factories

Factory activity in many Asian economies shrank in June as US tariff uncertainty kept demand low, but signs of modest relief for manufacturers raise the stakes in trade talks with Washington amid the region’s gloomy economic recovery prospects.

- LEIKA KIHARA

The underlying softness in private surveys released yesterday highlights the challenges facing policymakers as they try to navigate US President Donald Trump's moves to shake up the global trade order with sweeping tariffs.

Japan’s manufacturing activity expanded for the first time in 13 months, and South Korea's activity contracted at a milder pace, private surveys showed yesterday.

China's Caixin purchasing managers’ index (PMI) also expanded in June due to an increase in new orders, confounding an official survey that showed activity shrinking for a third straight month.

However, stalled trade talks with the United States, prospects of weakening global demand and lacklustre growth in China will likely weigh on Asia’s factory activity, analysts say.

“Overall, manufacturing supply and demand recovered in June,’ said Wang Zhe, economist at Caixin Insight Group on China's PMI.

“However, we must recognise that the external environment remains severe and complex, with increasing uncertainties. The issue of insufficient effective demand at home has yet to be fundamentally resolved,” Mr Zhe said.