Asia factory activity shrinks as US tariffs bite, China bucks trend
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Manufacturers in Asia will face pressure as exports weaken in the months ahead, analysts say.
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TOKYO - US tariffs took a toll on factory activity across Asia, overshadowing a surprisingly upbeat performance in China, private surveys showed on Sept 1, keeping pressure on policymakers to underpin the region’s fragile economic recovery.
The outcome reinforces concerns that manufacturers in Asia, which have been front-loading shipments to beat higher US tariffs, will face pressure on profits as exports weaken in the months ahead, analysts say.
Export powerhouses Japan, South Korea and Taiwan all saw manufacturing activity shrink in August, the surveys showed, underscoring the challenge Asia faces in weathering the hit from US President Donald Trump’s tariffs.
“It’s a double whammy for Asian economies, as they face higher US tariffs and competition from cheap Chinese exports,” said Dai-ichi Life Research Institute chief emerging market economist Toru Nishihama.
“We’ll likely see the hit from US tariffs intensify going forward, with countries reliant on US-bound shipments like Thailand and South Korea particularly vulnerable,” he said.
The RatingDog China General Manufacturing purchasing managers’ index (PMI), compiled by S&P Global, rose to 50.5 in August from 49.5 in July, beating market forecasts and exceeding the 50 mark that separates growth from contraction.
The reading confounds an official survey on Aug 31 that showed China’s manufacturing activity shrank for a fifth straight month in August on weak domestic demand and uncertainty over the outcome of Beijing’s trade deal with the United States.
Taken together, the surveys suggest the world’s second-biggest economy is still under significant strain.
“Notably, the manufacturing sector is helping the recovery, but this rebound is patchy,” said RatingDog founder Yao Yu.
“With weak domestic demand, potentially overstretched external orders, and slow profit recovery, the durability of the improvement depends on whether exports truly stabilise and whether domestic demand can pick up pace.”
The S&P Global Japan Manufacturing PMI stood at 49.7 in August, improving from 48.9 in July but staying below the 50 threshold for two straight months.
New orders from overseas fell at the fastest pace since March 2024 as companies battled weak demand from key markets like China, Europe and the US, the Japan PMI survey showed.
South Korea’s factory activity also shrank, with the S&P Global PMI standing at 48.3 in August, up from 48.0 in July but contracting for the seventh straight month.
Both countries struck a trade deal with the US that eased, but not remove, the pressure on their export-reliant economies.
Tokyo and Washington agreed in July to lower US tariffs on Japanese goods, including to 15 per cent from 27.5 per cent for Japan’s mainstay vehicles, though uncertainties remain around the implementation of the deal’s terms.
South Korea also signed an agreement in July that lowered tariffs to 15 per cent from a steeper 25 per cent duty, effective from August.
Manufacturing activity in Taiwan weakened in August, while that of the Philippines and Indonesia expanded, the surveys showed.
“Looking ahead, we think tariffs will lead to weaker global growth, which will act as a drag on Asia’s export-driven economies,” said Capital Economics markets economist Shivaan Tandon. REUTERS
