SINGAPORE (Oct 23): The US-China trade war is diverting trade and investment to third countries unencumbered by tariffs, which is good news for Asean, says Maybank KimEng.

And, the trade war appears to be hurting the US more than China so far.

See also: MAD about Sino-American trade

“From May to Sept, China’s exports to US are surging at a pace above 10%. In contrast, China imports from the US are collapsing, particularly soybeans, petroleum products and cars,” says analyst Chua Hak Bin in a Monday report.

In fact, China’s bilateral trade surplus against the US rose to a record high of US$34 billion in Sept.

Nevertheless, Chinese firms are front loading and shipping their exports out before the hike in US tariffs to 25% from 10% starting 2019.

Chua says China’s PMI new export orders have also fallen to below 50, suggesting that the recent export momentum cannot be sustained.

Meanwhile, the US-China trade war is disrupting the electronics supply chain, which is centred on China and many of the Northeast Asian economies.

The PMI is coming off for Korea, Taiwan and Singapore, key electronic producers in the supply chain.

But for Asean ex-Singapore, the electronics-related data is somewhat mixed, with softer exports but tentative signs of higher orders and investment.

In fact, some of Asean’s exports in products targeted by US-China tariffs are performing strongly, including Indonesia’s and Malaysia’s mineral products, says Chua.

There are also visible signs of greater FDI into Asean, especially Vietnam, Thailand and Malaysia, as firms adopt a more flexible production network outside China to circumvent the tariffs.

Net FDI in Thailand rose to a four-year high in the first half of 2018, driven by the manufacturing sector. Similarly, Vietnam’s FDI in manufacturing surged by near 20% in the first three quarters of the year. Malaysia’s FDI inflow into manufacturing also hit a historical high in the first half.