Speaking post-G20, experts have warned continued tensions would disrupt global trade, erode the effectiveness of the multilateral international trade regime and dampen growth.
Asia’s economies that are deeply integrated in regional and global tech and trade chains, including Hong Kong, Korea, Malaysia, Singapore, Taiwan and Vietnam, are most exposed to significant and lasting disruptions to trade and investment from the ongoing US and China trade war.
Speaking after the latest G20 summit Atsi Sheth, managing director, credit strategy & standards at Moody’s Investors Service said: “The announcement following the G20 meetings temporarily de-escalates hostilities between the US and China. However, we expect US-China relations to remain contentious. Narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf between their respective economic, political and strategic interests.”
Sheth also noted tensions between the US and China will affect global credit conditions in four key areas: trade, technology, investment and geopolitics.
More worryingly, US-China tensions will cast a pall over global credit conditions and quality. The impact will be felt at the global, country, sector, and company level.
“As the world’s two largest economies, the US and China are too strong to cede their respective national interests in negotiations with each other. However, an economic cold war that leads to decoupling would be costly for both countries, owing to their deep links with each other. Therefore, relations between the two powers will swing between conflict and compromise.
“Continued tensions would disrupt global trade, erode the effectiveness of the multilateral international trade regime and dampen growth. As every new development is reflected in financial markets, it will affect valuations and borrowing costs for many debt issuers,” added Sheth.