Global macro: Fresh US-China tariffs a further drag on growth – On 1 September, a new round of bilateral US-China import tariffs came into force. The US implemented 15% tariffs on an additional USD 110bn of imports from China; a second batch is due on 15 December. China has also started levying 5-10% import tariffs on an additional USD 75bn in US goods, including a 5% levy on crude oil. This latest tariff round is in line with our base scenario of a further escalation of the trade/tech war, and consequently a further weakening of economic growth. Our 2020 growth forecasts for the US, the eurozone and China have all been below consensus for a while, mainly for this reason. In our view, the escalation of US-China tensions (and the US-driven tendency to challenge the notion that ‘globalisation is always good’) is the main factor behind the weakening in global manufacturing. Despite all twists and turns in this conflict, the situation has become worse since last year and has contributed to worldwide policy uncertainty, a drop in business confidence and a slowdown in corporate investment spending and global trade.
Asia macro: Export PMIs remain weak – The emerging Asian manufacturing PMIs for August that have been published so far show quite a mixed picture. China’s official manufacturing PMI (published by NBS) dropped to 49.5 (July: 49.7, consensus: 49.6), whereas Caixin’s PMI rose back to a five month high of 50.4 (July: 49.9, consensus: 49.8). The difference between the two readings could reflect the fact that the stepping up of stimulus by the Chinese authorities is mainly targeted to the private sector, which is more strongly represented in Caixin’s survey. Elsewhere in the region, manufacturing PMIs dropped in India, Indonesia and Taiwan. By contrast, South Korea’s index rose back to a four-month high of 49. Still, it remained below the neutral 50 mark – as is the case for China (NBS), Taiwan and Indonesia as well as for Singapore, Hong Kong and Malaysia (where August numbers will be published soon). PMI export sub-indices also remain subdued in most Asian countries. All this shows that the escalation of the US-China trade/tech war is making itself felt in the manufacturing sectors of the highly export oriented emerging Asian region. (Arjen van Dijkhuizen)