Sat, May 18, 2019 - Page 12 News List

Trade dispute is hurting GDP, DBS Bank says

STARK REMINDER:In the long term, a setback in US-China trade negotiations could indicate the start of a new normal of uncertain relations, the bank said

By Kao Shih-ching  /  Staff reporter

The US’ plan to impose tariffs on US$300 billion of Chinese imports could hurt Taiwan, eroding its GDP growth by 1 percentage point this year, as Taiwanese firms are deeply involved in China’s electronics supply chain, DBS Bank (星展銀行) said in a report yesterday.

However, the bank would stand by its GDP growth forecast of 1.9 percent for this year, even as downside risks intensify, Singapore-based DBS economist Ma Tieying (馬鐵英) said.

Washington’s plan to extend tariffs to another US$300 billion of Chinese goods would increase the threat to Taiwan, Ma said.

The tariffs would hit a wide range of electronics products, including cellphones, laptops, tablet computers, video monitors and TV reception apparatuses, Ma said.

As electronics exports to China account for nearly 20 percent of GDP, economic growth for this year and next year would drop by 1 percentage point if Washington next month imposes the 25 percent tariffs, Ma said.

The US Trade Representative is to hold a public hearing on June 17 to decide whether the tariffs would go into effect.

The risks are high, Ma said.

Taiwan’s central bank is expected to stay firm on monetary policy this year and next year under its base case forecast, but rate cuts would become likely if a full-blown trade war occurs and the risk of recession increases, DBS said.

With the manufacturing purchasing managers index last month falling to 48.2 from 49 in March and annual export growth remaining in negative territory, the near-term growth outlook appears sluggish, the report said.

The re-escalation of trade tensions would likely further weigh on the near-term growth outlook by dampening business sentiment and augmenting financial market volatility, it said.

In the longer term, the setback in US-China trade negotiations serves as a reminder that uncertainties in relations between the two nations could become the new normal, it said.

Even putting aside trade disputes, their competition in the high-tech space would likely escalate in the coming years to involve sensitive issues such as cybersecurity, intellectual property protection and forced technology transfer, it added.

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