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Asia's tumbling exports signal trade pain has room to run
[TOKYO] Key exporters Japan and South Korea provided fresh evidence over the past two days that the slump in global trade has further to run, and is beginning to spread to factories.
South Korea's total exports tumbled by 12 per cent during the first 20 days of February, while shipments of semiconductors, a key driver of growth, dropped by 27 per cent. A day earlier Japan reported that exports fell 8.4 per cent in January from a year earlier, the first back-to-back fall in more than two years.
One common denominator: both countries' shipments to China fell sharply, as that nation's cooling economy, the US-China trade war, and a slowing of the global technology cycle all take a toll on world trade. Declining activity at ports in Hong Kong and Singapore, two of the world's busiest, also demonstrate the impact of weaker demand for Chinese goods.
Japan's exports to China dropped 17 per cent in January, while Korea's fell 14 per cent in the first 20 days of February. The shipments to China were likely distorted at least somewhat by the Lunar New Year holiday, but the slump is in line with the longer-term trend.
The slowing of trade is hurting Japan's factory sector, with manufacturing activity contracting this month for the first time in two and a half years, according to preliminary data released Thursday. Net exports were already a drag on gross domestic product growth during the fourth quarter, according to data released last week.
In South Korea, external factors including the trade war and semiconductor cycle are the backdrop for a correction in business investment, the finance ministry said in its monthly economic assessment last week.
Korean exports are likely to drop further in the second quarter as chip prices continue to slide, said Stephen Lee, an economist at Meritz Securities Co. in Seoul. Exports fell 5.8 per cent in the full month of January.
The Bank of Korea said in a report to parliament last week that the prolonged trade war is hurting South Korea as well as the US and China, and it would put significant pressure on global trade and Korean exports if it worsens.
Trade talks between the US and China are continuing this week in Washington and are scheduled to run through Friday. While the slowdown in China is expected to deepen in the first quarter, analysts are seeing signs of stabilization after that as government support measures kick in.