The proposed trade protection policies of Donald Trump could hurt Asian exports to US, Goldman Sachs says.
While the timing of the implementation is uncertain, the threat of reduced exports to US must be a focus for Asian investors. Markets are yet to fully price in the likely impact,
Trump during the presidential campaign harped on reducing the US-China trade deficit and house republicans have called destination-basis cash ﬂow tax. such trade and tax policies will impact Asian exporters, economies and equity markets, the investment bank said. A 5% decline in US import growth could lead to a 8% drop in the Asian equities ex Japan with South Korea, China and Taiwan leading the losses, they said.
Here’s a chart, which depicts the likely impact from Trump’s policies:
The companies that are vulnerable include KIA Motors, SMIC, Advantech, Cipla and Acer.
Goldman said previous trade barriers imposed on Asian countries had a bigger impact on export-oriented sectors. The following table shows the firms that may be exposed.
Goldman said it expected the Trump administration to begin with anti-dumping duties. While the the threat of tariffs remains, Trump has so far only suggested 45% and 35% tariffs for China and Mexico, respectively, they said.
Chinese steel and chemical firms, car, computer and apparel makers in Asia, Mexico and firms from Taiwan, South Korea and Malaysia, which feed into the global supply chain were the most exposed, they said.
Investors appear to have shrugged of the risks and are yet to slap a discount on the the vulnerable stocks, they said.
Share prices for the companies, which slipped after the election, “have quickly recovered, with their relative performance back to the pre-election level,” Goldman Sachs said.