Trade Wheel of Asia: Challenges and Shrinking Manufacturing Activity

Asia's factory activity contracted in May, severely influenced by soft demand in China and U.S. tariffs, as private surveys indicate. Manufacturing activity in Japan and South Korea continued to decline as negotiations with the U.S. falter, creating uncertainty and deflationary pressures in the region.

In May, Asia's manufacturing activity faced significant setbacks, predominantly owing to declining demand from China and the repercussions of U.S. tariffs. A series of private surveys released on Monday painted a bleak picture for the future of this once-thriving region, highlighting its dimming prospects.

Japan, alongside South Korea, witnessed a contraction in manufacturing activities, further clouded by U.S. President Donald Trump's tariffs on automobiles, intensifying concerns over export potential. China's manufacturing downturn, as evidenced by an official survey on Saturday, suggests ongoing weakness in the world's second-largest economy, which continues to ripple across Asia.

A lack of progress in U.S.-Asia trade negotiations contributes to prevailing uncertainty, deterring businesses from enhancing production or investment. Economists warn against anticipating a swift revival in Asia's manufacturing sector, as high tariffs, weak domestic demand, and China's influx of inexpensive exports perpetuate deflationary pressures.

(With inputs from agencies.)