Examples of “intermediate goods” include semiconductor chips and screens. Those components are typically manufactured in different locations across Asia before they’re sent to China for assembly into products such as mobile phones and computers.
The first round of tariffs expected on Friday do not target “goods commonly purchased by American consumers such as cellular telephones or televisions,” according to the Office of the US Trade Representative. But if those tariffs — and subsequent rounds — result in a fall in Chinese exports to the U.S., there will be knock-on effects for the rest of Asia, J.P. Morgan analysts wrote in a note.
“By its very nature, such products are highly reliant on tightly integrated supply chains. To that extent, this would propagate any trade shock into the region,” the J.P. Morgan analysts said.
Such threats are coming at a time when emerging markets, including those in Asia, have been battered by capital outflows and have seen their currencies weaken in the process.
By the end of Thursday, the Taiwanese dollar was down by around 2.9 percent since the start of the year to 30.524 per U.S. dollar, while the Korean won weakened 4.9 percent to 1,118.33 per U.S. dollar in the same period.
In Southeast Asia, Singapore’s currency was down 2 percent year-to-date on Thursday to 1.3645 per U.S. dollar, while the Malaysian ringgit saw a smaller dip of 0.07 percent to 4.041 per U.S. dollar during the same time frame.
But until all the targeted goods are known, it’s difficult to quantify the actual impact that Asian economies could actually see, experts said. In fact, the damage could also be smaller than expected since China is the dominant supplier of many goods that it sells to the U.S., Leather said.
“U.S. consumers would struggle to find sufficient substitutes to replace the goods that they currently buy from China, at least in the short-term. What’s more, to the degree that other countries can step in, Asian exporters are well-placed to benefit from any shift in U.S. demand,” he said.
“Until we know exactly which goods are targeted, it will be impossible to calculate the impact on the rest of Asia,” he added.