Asian Factories Finish 2024 on a Shaky Note as the Risks of Trump 2.0 Loom Large

As prospects for the New Year deteriorated due to China's shaky economic recovery and mounting trade uncertainties from a second Donald Trump presidency, Asia's factory powerhouses closed 2024 on a low note.

China and South Korea saw a slowdown in industrial activity, according to a set of manufacturing purchasing managers' indexes for December released on Thursday. However, Taiwan and Southeast Asia showed some indications of a recovery.

Trump, the US president-elect, has promised to put high tariffs on imports from China, Canada, and Mexico, three significant trading partners. This is anticipated to have an impact on other key exporting countries as well as on international commercial activity in general.

The Caixin/S&P Global Manufacturing PMI for China undershot experts' projections, showing just slight growth, as it dipped to 50.5 in December from 51.5 the month before.

That was in line with an official survey that was made public earlier this week and revealed that factory activity was hardly increasing.

"Beijing's increased policy support in late 2024 gave growth a short-term boost, which is likely to be seen in other fourth quarter indicators," said Gabriel Ng, assistant economist at Capital Economics.

"And this improvement should carry over into early 2025," Ng stated. "But the boost probably won't last more than a few quarters, with Trump likely to follow through on his tariff threat before long and persistent structural imbalances still weighing on the economy."

In contrast to better-than-expected export growth data reported on Wednesday, South Korea's PMI revealed activity declining in December and a slowdown in output gathering momentum elsewhere in Asia.

The governor of South Korea's central bank stated on Thursday that because of increased political and economic uncertainty, the rate of monetary policy easing will need to be flexible this year.

A national political crisis following President Yoon Suk Yeol's unsuccessful attempt to establish martial law last month has impacted business confidence in South Korea, adding to the uncertainty surrounding international trade.

Japan's PMI earlier in the week indicated that activity was declining, albeit more slowly, in December.

Although the South Asian economy's manufacturers continued to outperform their regional counterparts, posting uninterrupted expansion for the past three and a half years, India's manufacturing activity rose at the slowest pace for 2024, according to its PMI.

Vietnam and Malaysia also reported a drop in industry activity.

With activity expanding at the quickest rate in five months and PMI survey participants reporting robust sales in Asia, Europe, and North America, Taiwan was a rare bright spot.

Additionally, Singapore, a city-state that is seen as a barometer of international trade, increased at its quickest yearly rate since the pandemic in 2024, according to government data. This growth was partly driven by a hurry to export before anticipated new US tariffs went into force.