With Trump Tariffs Kicking In, Southeast Asia’s Factory Mood Slips To Pandemic-Era Lows

Southeast Asian manufacturers' optimism about future growth has slumped to their lowest levels since the COVID-19 pandemic despite a rebound in activity amid the onset of U.S. President Donald Trump’s tariffs.

According to the S&P Global ASEAN Manufacturing Purchasing Manager’s Index report, confidence for the year-ahead output slumped to the lowest level in five years, with producers expecting relatively tepid growth over the next 12 months compared to the historical average.

The weak sentiment stood in sharp contrast to the July manufacturing activity in the region, which rose to 50.1 from 48.6 in June. A figure higher than 50 implies an expansion of activities. The report added that new orders declined only marginally, marking the softest decrease in the current four-month sequence of contraction, which hints at a possible rebound in demand.

Retail sentiment on Stocktwits about the iShares MSCI Emerging Markets Asia ETF (EEMA) was in the ‘neutral’ territory at the time of writing.

Factories in the heavily trade-reliant economies of Southeast Asia have been upended by uncertainty around Trump’s tariffs. However, in July, most countries in the region were able to strike trade deals with the U.S., with varying rates of tariffs ranging from 10% to 40%.

The survey also found that buying activity remained stable in July compared to the previous month, while staffing reductions were implemented at a slower pace. However, despite the positives, manufacturers were not very bullish about the future.

“Optimism reached its lowest point in five years, well below the long-run average. While an increase in output is anticipated, the growth rate is expected to remain subdued,” said S&P Global economist Maryam Baluch.

On Thursday, official data showed that China’s factory activity in July slumped to its lowest level since April, despite the easing of U.S. tariffs, amid signs of weakness in exports and tepid domestic consumption.

The iShares MSCI Emerging Markets Asia ETF has risen 16.7% this year, while the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, has gained 7.2%.

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