Credit Conditions Asia-Pacific Special Update: U.S.-China Ties In Uncharted Territory

The threat and imposition of tariffs by the U.S. continue to loom over global trade and economic growth and could also reignite U.S. consumer inflation. In addition, confidence is set to deteriorate further amid halts in new business investments and worsening household sentiment. Furthermore, equity and debt markets are likely to stay volatile. Taken together, these economic, consumer, and financial market developments are negative for Asia-Pacific and global credit. In our view, technology companies will continue--and perhaps with some acceleration--their pace of supply-chain diversification, but we are unlikely to see dramatic shifts. The current environment (specifically, tariff policy) isn't conducive to large scale change in investment plans. For the U.S. and China, tech supremacy pertains to both economic interest and

...- Asia-Pacific credit conditions to deteriorate: The recent escalation in China-U.S. relations and uncertain U.S. trade policy are hitting growth and confidence in Asia-Pacific. With market volatility persisting, tighter financing conditions will compound liquidity strains. Taken together, these developments are negative for Asia-Pacific credit. - Tariff risks linger: The threat and imposition of tariffs by the U.S. will slow global trade and confidence. The region's dependency on exports with China and the U.S. will have an outsized hit on manufacturers and small economies. Should the tariffs announced on April 2, 2025 resume for economies ex-China, the geopolitical and economic fallout will be deep. - China's growth falters: Persistent tariffs on Chinese exports reduce competitiveness and new business investments. Real estate challenges and a gloomier backdrop will sap confidence further. Chinese exporters could cut prices to offload excess capacity. Pain among Asia-Pacific domestic manufacturers...

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