Trade war fears mount - Capital Economics
Emerging Asia Economics

Trade war fears mount

Emerging Asia Economic Outlook
Written by Capital Economics Economist
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The growing threat of a US-China trade war is the key risk to the outlook. The tariff measures announced so far don’t amount to much, but any escalation in trade tensions that leads to a significant fall in US imports from China would have a sizeable impact, not just on China, but also on other countries such as Taiwan and Malaysia which export a lot of intermediate goods to China. Even if trade tensions don’t worsen, GDP growth in Emerging Asia has peaked and is likely to ease over the coming year. In most cases the slowdown will be very gradual, with Pakistan and Hong Kong as the main exceptions. With the risks to growth tilted to the downside and inflationary pressures subdued, policy rates are likely to remain low. In contrast to the consensus, which is expecting interest rates to rise across the region in 2018, we think rates will remain on hold in most countries and could even be cut further in Indonesia and Sri Lanka.