Morgan Stanley Fixed-Asia Economics The Viewpoint The Risk of Trade Tensions Re...-106357439

MFebruary5,202406:24PMGMTMorganStanleyAsiaLimitedIdeaAsiaEconomicsAsiaPacificChetanAhya+8522239-7812+656834-8272TheViewpoint:TheRiskofChiefAsiaEconomistTradeTensionsReturningChetan.Ahya@morganstanley.com+8522848-5652AsChina’sproducerscontinuetopushexcesscapacityoffshore,DerrickYKamweseetheriskoftradetensionsreemerging.Moreover,ifRepublicanswintheWhiteHouseintheNov-24USelections,aAsiaEconomistpotentialriseintariffswillweighonAsia’sgrowthoutlook.Derrick.Kam@morganstanley.comWatchfordamagetothecapexcyclemorethantrade.JonathanCheungKeyTakeawaysEconomistChinaisemergingasadeflationaryforce,asitcontinuestoexpandmanufacturingJonathan.Cheung@morganstanley.comcapacityatatimewhendomesticdemandisweakening.Nowthatglobalsupply-chaindisruptionshavereceded,weseeearlysignsoftradetensionsreturning.ApotentialchangeinadministrationposttheUSPresidentialelectionscouldriskanotherroundofrisesinimporttariffs.Anacross-the-boardtariffincreaseacrossallcountrieswillposemoredamagetothegrowthcycleascomparedtotariffsononecountry.Likeinthepreviousinstance,theadverseimpactoncorporateconfidenceandcapexwillbemoredamagingthandirecteffectsoftariffs.Forimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.MIdeaWillTradeTensionsReemergeandPoseDownsideRiskstoAsiaLastweek,wehighlightedhowdeflationaryandcompetitivepressuresfro...