Opinion | When the world’s economic giants wage a trade war, the heat is felt from Singapore to Seoul
The trouble with this clash of the titans, as Singapore and South Korea are learning, is that neither Donald Trump nor Xi Jinping understands the other
With the world’s two biggest economies in an all-out brawl, it’s easy to miss important warning signs flashing in smaller ones.
Take Singapore and South Korea. Singapore’s economy just grew at the slowest pace in a year. The 1 per cent quarter-on-quarter growth rate between April and June isn’t alarming in itself. Yet virtually everything that could go wrong is showing up in the data: fallout from Donald Trump’s trade war, central bank tightening, a stronger dollar and rising oil prices.
An aberration? Not when you consider what’s afoot in South Korea, another open, trade-reliant nation that often acts like a global weathervane. After rising 13.2 per cent in May, exports stopped on a dime, contracting 0.1 per cent in June from a month earlier. Again, it’s not a particular number that spells trouble – it’s the trajectory as Washington and Beijing scuffle.
Consider these ominous words from Bank of Korea Governor Lee Ju-yeol last week.
“In the beginning, many thought that the US-China trade row would not escalate,” Lee said. “But now, it is spreading rapidly and heightening uncertainties in the global economy. It is hard to predict the future. But we are well aware that the clash between the two powerhouses will affect the South Korean economy and its exports.”
That clash is beginning to take down giants, too. Japan, the world’s No 3 economy, is seeing a marked downshift in sentiment. In the latest three months, the Bank of Japan’s tankan survey of big manufacturers dropped to 21 from 24 in March. The timing couldn’t be worse. This, after all, is the year Prime Minister Shinzo Abe hoped his five-year reflation plan would finally give workers a big raise.