Asia’s factories suffer major blow as tariffs dampen demand

Manufacturing activity across most of Asia contracted in April, with companies struggling with weaker demand and pausing new orders in the face of US President Donald Trump’s baseline 10% tariff.

Purchasing managers indexes for the region’s factory giants, including South Korea and Taiwan, slipped sharply last month as the global trade uncertainty led to declines in new orders and cutbacks in production, surveys published by S&P Global showed on Friday. India was an outlier, showing an expansion in activity.

Trade bellwether Taiwan posted a PMI of 47.8 in April, its lowest in 16 months and staying well below the 50 waterline that separates expansion and contraction. New business fell for the first time in over a year, leading to lower output and purchasing. Companies cited weaker demand domestically and in key export markets in Asia and Europe, with some attributing it to Trump’s tariff hikes.


“The impact of US tariffs and expectations of slower global growth also dampened projections for the year ahead,” S&P Global Market Intelligence’s Annabel Fiddes said in a statement on Taiwan’s data. “Companies generally anticipate production to decline over the next 12 months, with the degree of pessimism the most pronounced since January 2023.”

South Korea’s PMI dropped to 47.5, its weakest print since September 2022. Firms opted for retrenchment as production shrank in April and the outlook for the coming year turned negative.

The gloom is evident across the region that accounts for bulk of the world’s manufacturing. In Southeast Asia, factory activity shrank in Thailand, Malaysia and Indonesia. On Wednesday, China reported similar results with its PMI slipping more than expected to 49 from 50.5 in March.

The latest data shows the extent of the fallout after Trump imposed the steepest US duties in more than a century, including a 145% tariff on many products from China; a 25% rate on most imports from Canada and Mexico; duties on some sectors such as steel and aluminium; and a baseline 10% tariff on the rest of the country’s trading partners.

The US president suspended higher, customised tariffs on most countries for 90 days. Since then, there’s been a flurry of negotiations as officials globally seek to avoid charges. Asian nations would be among the hardest hit in the trade war, as many economies such as Vietnam and Cambodia rely heavily on exports to the US.

The region has increased shipments to the US since both the pandemic and the trade disputes of Trump’s first term. Companies have sought to diversify supply chains to avoid the higher levies and uncertainty associated with China.

There are a few bright spots. The Philippines was an outperformer as the upcoming local elections buoyed its PMI into expansion territory at 53, from 49.4 the month prior. Meanwhile, India was again the region’s best, with its PMI rallying to a 10-month high of 58.2 in April, according to data from S&P Global and HSBC Holdings Plc.

“The notable increase in new export orders in April may indicate a potential shift in production to India, as businesses adapt to the evolving trade landscape and US tariff announcements,” HSBC economist Pranjul Bhandari said in a statement.

Still, the broad sign from the latest PMI data shows that there will likely be a “material slowdown in Asian exports and production in coming months,” according to a report by Nomura Holdings Inc. on Friday.

Any escalation or deescalation of tariff policies in the ongoing negotiations may breed uncertainty and stall capital expenditure, Nomura economists Si Ying Toh and Sonal Varma said. “Investors should brace for more volatility ahead,” they said.