Tariff Uncertainty Could Hinder Manufacturing Investments in Asia

HSBC economists have stated that uncertainties regarding the U.S. trade policies may have adverse effects on manufacturing investments in Asia and could weaken regional growth. In a report prepared by economists led by Frederic Neumann, it was noted that the lack of clarity on how U.S. tariffs will be shaped during the Trump administration may lead to a slowdown in cross-border foreign direct investments.

The report indicated that a decline in manufacturing investments could affect regional growth more severely than a fall in exports. According to experts, U.S. importers may increase shipments in the short term to avoid potential tariffs, but this increase may not compensate for long-term investments.

The impact of U.S. trade policies may vary HSBC economists suggested that if U.S. trade restrictions are largely focused on China or are implemented more limitedly than feared, manufacturing investments in Asia could experience a strong recovery. However, if U.S. trade policies are applied in a broader and more restrictive manner, it is anticipated that manufacturing investments could weaken in a more long-term and permanent way.

Experts pointed out that the slowdown in investments in the manufacturing sector could have profound impacts on regional growth, emphasizing that U.S. trade policies will play a critical role in the economic outlook for Asia.