On Monday afternoon, the U.S. Trade Representative’s office announced the U.S. will impose new duties of as much as 30% on foreign-made solar equipment and as high as 50% on imported washing machines. Still, the MSCI Asia Pacific Index of stocks rose for a third day, while most emerging currencies in the region advanced.
While President Donald Trump’s decision to slap tariffs on imported solar panels and washing machines has a limited immediate market impact in Asia, it will probably have bigger implications on the region’s trade and economic outlooks, according to various analysts.
Below are comments from analysts, compiled courtesy of Bloomberg:
Linus Yip (chief strategist at First Shanghai Securities in Hong Kong)
- Investors are not too worried about the news because these sectors have already discounted possible tariff moves by Trump; implementation isn’t a shock or a surprise to them.
- Impact should be very limited given the news has been in the market for a long time.
Robin Xiao (analyst at CMB International Securities in Hong Kong)
- Major solar cells and module exporters will be affected by the tariff, especially the leading names such as Jinko, Trina, Canadian Solar, JA etc., but the impact will probably be limited in the short term since the tariff is well expected from the Trump administration’s trade attitude.
- Co. expects solar downstream demand will maintain its growth momentum though U.S. demand may decline on the tariff impact, as cost reduction measures are still on track towards grid-parity.
Toru Nishihama (EM economist at Dai-ichi Life Research Institute in Tokyo)
- “If U.S.-China relationship sours from this tariff deal, affecting China’s trade, it will also have quite a significant implication on Southeast Asia, whose shipments to China is very large.”
- It will take time to see the actual impact on the shipments and on the economy, but this is one risk to cool the sentiment for emerging-market economies; a pick-up in global demand was largely supported by a recovery in demand from China, and emerging-market shipments have grown at a faster pace than those in developing nations. So, China’s outlook is very important.
Suan Teck Kin (head of research at UOB in Singapore)
- The U.S. probably wants to send a message “Get to the table, let’s negotiate,” rather than punish these producers.
- Electronics is one area markets are watching for as companies and industries in Asia are linked to phone and computer manufacturing; cars and textile products are also vulnerable areas.
- South Korea-U.S. free trade agreement is on the line; Southeast Asia shielded to a certain extent as 25% of trade is done within Asean itself. Investors should diversify investments and not concentrate in industries that would be vulnerable to Trump’s “Make American Great Again” policy.
Joshua Crabb (head of Asian equities at Old Mutual Global Investors in Hong Kong)
- Clearly countries like Korea and Thailand have very strong trade balances at the moment and this is a focus of the Trump White House; countries meeting the U.S. Treasury’s key criteria will evidently be at risk.
- The impacts take time and are often watered down, and for many Asian companies the delta is often not the U.S. these days
Source: Bloomberg
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