US-China trade war could squeeze profits of Taiwan’s top companies, S&P says
- Weaker iPhone sales, rising competition and oversupply are pressuring Taiwan’s tech firms, S&P says
- Taiwan however has raised its GDP growth forecast for this year and next
Taiwan’s biggest companies, particularly technology firms, could see their profits squeezed in the second half of this year and into 2020 as a trade war continues to escalate between the United States and China and the global economy slows, according to S&P Global Ratings.
The credit ratings agency said makers of display panels, branded information technology, electronics manufacturing services and components could face “particular downside pressure on their profitability and debt leverage”.
“We view the greatest risk from escalating trade tension to be further weakening in China’s economic growth,” S&P credit analyst Raymond Hsu said in a research report released on Wednesday. “A slowdown in China’s economic engine could affect almost all of Taiwan’s top corporates, given their trade reliance on China and the importance of global demand for the products they manufacture in and export from China.”
The US and China have been caught in a tit-for-tat over trade for more than a year, with US President Donald Trump placing tariffs on about US$380 billion of Chinese imports as he tries to pressure Beijing to change years of trade and industrial policy. China has responded with its own retaliatory tariffs.
Another US$160 billion of Chinese-made products are expected to face 15 per cent tariffs beginning on December 15 and an end of the trade conflict does not appear in sight. Bank of America Merrill Lynch said in a research note released on Wednesday it expects tariffs to remain in place through the end of next year.