Global trade is declining for the first time in years as tensions between the US and China mount

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  • Last month trade tensions between the United States and China escalated with both sides introducing new tariffs on goods imported from the other.
  • The impact is now being felt among manufacturers with new export orders declining at the fastest pace since August 2016 in September.
  • The declines were particularly noticeable in Asia, especially in China where external demand weakened sharply.

The latest batch of manufacturing PMI reports for September have just been released, providing what is as close to a real-time snapshot of what’s happening in the sector.

So what is the main takeaway from what happened last month?

Put simply, trade tensions between the United States and China are now clearly starting to impact demand from abroad, especially in Asia.

This chart from HSBC demonstrates why.


With the exception of India, Malaysia, Thailand, and Vietnam, new export orders are falling across all other parts of Asia.

Grey shading indicates that new export orders fell among firms in individual nations, with dark shading indicating that they fell at a faster pace than a month earlier.

While not enormous declines by any stretch — a reading below 50 indicates a fall with the distance away from this level reflective of how fast the decline was — there were some worrying trends, particularly in China where new export orders fall faster than a month earlier, hitting fresh multi-year lows in the process.

With the exception of the US and UK, weakness was also evident in other major trading nations such as Germany and France, leaving the decline in new export orders globally at the fastest pace since August 2015.

“The US-China trade tussle, in short, isn’t going to prompt a sudden stall in growth,” says Frederic Neumann, Co-head of Asian Economics Research at HSBC.

“Rather, it means a slow grind lower, with disruptions to trade and investment uncertainty continuing to weigh on demand.

“We’ll be in this for a while. Better get used to it.”

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