Asia’s powerhouse exporters could get hit hard if US elections end up deflating the AI boom, though the news isn’t all bad for the region that drives global economic growth.
The Made-in-America market rout that spread across Asia on Friday - triggering circuit-breakers in Seoul and plunging Tokyo and Taipei into bear markets — reflects fear that Washington will hit the brakes on data centers. That would cool the demand for chips and other electronics that’s delivered record trade surpluses. China risks losing a chunk of the high-tech exports that have kept its economy on track. Others like South Korea are still more exposed.
Still, that’s not the only shift in the world economy that could result from the stinging defeat for President Donald Trump’s Republican Party in this week’s midterms.
His war on Iran, unpopular with US voters, triggered the other powerful force shaping economies this year: the surge in energy costs. Asia’s key economies are importers, so they’ve been at the sharp end. Countries like India and Indonesia have seen their external finances, and their currencies, come under strain. Brent crude’s 15% decline this week, on hopes the conflict will de-escalate, offers relief.
The fizzling of the AI trade “will cause economic ripples across Asia,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc. “Slowing demand for everything from chips and cables to cooling systems and electric converters is bound to weigh on export growth.” On the other hand, “lower energy prices will go a long way toward cushioning growth in Asia.”